Client Money Protection – a letting agents dilemmaMake Text Bigger
Should an Estate Agent / Letting Agent have Client Money Protection (CMP) insurance and do the General Public understand (or care about) the risks associated with dealing with an agent that doesn’t have any CMP in place? If an agent does want to implement Client Money Protection Insurance – how easy is this to do?
Following on from my blog on the risks of dealing with “part-time Estate Agents that have opened up lettings departments”, many fellow bloggers commented on the need for having CMP in place to protect landlord’s financial interests and how many of these part-time agents were simply not insured.
Virtually every week we hear about another Estate Agent that is closing down.
If any of these failing businesses have created a letting department (as they desperately look for ways to create more income just before the inevitable administration) but do not have any Client Money Protection insurance – then it is likely that the landlord’s rent money and the tenant’s security deposit money will be lost at the same time as the Estate Agent loses his livelihood.
Remember – letting agencies are engaged to act as agents on behalf of the landlord. So, if the tenant’s security deposit money or the landlord’s rent money is misappropriated (or lost when the business goes bust) – then the LANDLORD remains liable for the loss.
Many Estate Agents claim to use The Deposit Protection Service (the Government approved custodial scheme) to protect the tenant’s security deposit thereby partially negating the need for Client Money Protection insurance. However, landlords only discover that the failing agent hasn’t been sending the tenant’s deposit money to the custodial scheme when it is too late and the agent has finally gone bust!
The Property Ombudsman (TPO) is aware that Client Money Protection is not currently mandatory and has been recently surveying its’ members to see whether there is sufficient support to instigate a change.
As a Letting Agent, myself, I joined the UK Association of Letting Agents and have registered with The Property Ombudsman (TPO). I use MyDeposits (backed by the National Landlords Association) to protect my tenant’s security deposit money as I believe that this schemes offers more flexibility to my customers than the custodial scheme.
I do not have ANY Client Money Protection insurance at the moment though. Why?
I wanted CMP and I wanted to join SafeAgent but my UK ALA membership is not recognised by them – which is ironic when you consider that the UK ALA is owned by the National Landlords Association – the very people that SafeAgent and Client Money Protection schemes should be protecting!
I could join the National Approved Letting Scheme (NALS) and participate in their Client Money Protection Insurance programme but they make no allowance for my business being a member of the UK ALA either (or the fact that I adhere to the code of conduct defined by TPO and UKALA).
What’s the point of joining the UK ALA and TPO if I need reaffirm everything to join NALS?
Additionally, the NALS membership application process is like “sticking pins in your eyes” and after 30 minutes I gave up trying to complete their on-line application forms. I telephoned to ask whether I could save the information that I had entered online for completion later (Answer: no you can’t) and also queried why as a “non-affiliate” NALS applicant was I being presented with a checklist of information that “affiliate” applicants needed to provide (Answer: a bug in the application software).
NALS refusal to recognise my UK ALA or TPO membership (or to make any allowances in their application process) meant that they were demanding references from my solicitor, my accountant and bank manager (all of which have already been provided to the UK ALA). This process is too hard!
Client Money Protection insurance is an important issue for letting agents and landlords alike but the letting industry does not seem to be able to work together to deliver a coherent solution. Until this happens – many reputable agents, including myself, are going to have to continue uninsured!
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