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Letting agents regularly go bust amid claims of owing landlords and tenants thousands of pounds, so here’s a quick guide to what to look for to safeguard your money.
Letting agents are not regulated, which means anyone can open and trade as a letting agent without any qualifications or licence.
Like any other business, if a letting agent stops trading, landlords and tenants become creditors and risk losing any rents or deposits held by the agent.
To stop this, several industry groups run ‘client money protection’ schemes – sometimes called ‘CMP’.
Belonging to a client money protection scheme does not mean a landlord will receive compensation if something goes wrong – the schemes have terms and conditions, like time limits for claims and caps on pay outs, so check the finer points do not exclude your rental business.
The main CMP schemes are:
● National Approved Letting Scheme (NALS)
NALS will pay up to £25,000 for any one claim, with a cap for landlords of three months’ rent. The total top pay out for a single claim is £300,000, while the scheme will only pay £3 million in any one year.
● Association of Residential Letting Agents (ARLA)
ARLA will compensate a landlord up to a limit of £25,000. Landlord claims are limited to three months’ rent. The total payable for a member company is £500,000. In any one year, the scheme has a limit of £3 million.
● Royal Institution of Chartered Surveyors (RICS)
RICS will pay a maximum of £50 000 per letting agents, subject to an overall limit for the scheme of £5.3 million for any one year.
SafeAgent is not a CMP scheme, but an umbrella group for letting agents who are members of a CMP scheme. The aim is to promote money protection by displaying a single, recognisable logo that shows any money with a letting agent is safeguarded.
Letting agents belonging to client money protection schemes should display a logo of one or more of the schemes listed above on their web sites and letterheads.
Even if you see the logo, still check the CMP scheme web site to make sure membership is valid.
Some unscrupulous letting agents say they are members and use the logo when client money is not protected.
Don’t forget that just because the agent was part of a CMP scheme one year does not mean membership is still in force years later – check every year.
Keeping on top of rent payments is the best way of minimising any losses, even if the letting agent is a client money protection scheme member.
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