Mandatory Client Money Protection Recommended by Parliament

CMPI reportA parliamentary working group appointed to examine client money protection insurance (CMP) in the private rented sector has recommended Government move forward with the mandating of CMP for agents in England that handle client money.

A report has been published by the working group, chaired by Baroness Hayter and Lord Palmer of Childs Hill and which took evidence from UKALA in 2016:

It recommends:

  1. The Government uses its powers in the Housing and Planning Act 2016 to make Client Money Protection mandatory and gives further consideration as to how to manage implementation and enforcement.
  1. Minimum terms and conditions of cover and agreed standards are dictated either by Government or a lead enforcer to ensure that schemes are consistent in their approach, underwriting and claims payouts.
  1. Enforcement is by local authorities, primarily Trading Standards but with flexibility to allow enforcement by local authority private sector housing teams that have regular contact with landlords, letting agents and tenants.
  1. Providers of CMP, redress schemes and Trading Standards share information to ensure that compliance can be checked.
  1. The Government considers authorising a prime authority for enforcement, recognising CMP schemes and providing up to date information. This authority should hold information that can be shared with other relevant organisations on which agents are compliant with the requirement to trade with CMP.
  1. If an agent is found to be handling client money without having CMP, they should be fined or shut down. Agents who receive fines for noncompliance should not be permitted to continue to handle client money.
  1. The Government, or its appointed authority, should issue guidance and ensure sufficient communications to support implementation.
  1. British Bankers Association in liaison with the Government to produce guidance for banks on enabling the opening of client bank accounts without the need for evidence of due diligence on individual landlords.
  1. Measures on CMP are linked to the work underway on the ban on letting agent fees for tenants. Any other changes to the sector should be considered in the round and implemented in a sensible and coherent way.
  1. Implementation of mandatory CMP should be done on a transitional basis

UKALA understands that DCLG intends to push ahead with a consultation on proposals based on the working groups conclusions in April. It is expected that this will run in parallel with the awaited consultation on plans to ban letting agent fees to tenants.

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