Since 1 April 2019, the law has required all agencies sign-up to a government-approved CMP scheme if they handle any client funds. Failure to comply can result in a penalty of up to £30,000.
Landmark fine for CMP non-compliance
The recent tribunal of Carter & Reeves Ltd found that the company was in breach of the regulations as their compliance relied on the CMP membership of a former director – Mr Draper. The judge concluded that once Draper ceased to be a director, within days of applying for CMP cover, the company no longer belonged to the scheme.
Judge Marks said: “Agents are running a business and are expected to be aware of their legal obligations, and the true status of each of their directors.”
Under the Act, the company was fined £24,000 for non-compliance.
Enforcement of CMP
Since the change in legislation in England, there have been several regional Trading Standards crackdowns, including in London and the West Midlands. To date, Trading Standards authorities have issued penalty notices of more than £3m across London alone.
The West Midlands crackdown was supported by The National Trading Standards Estate and Letting Agency Team (NTSELAT), which provides specialist advice, guidance and support to local authorities.
Propertymark works closely with Trading Standards to investigate non-compliance and uphold the highest standards for members. If an agent has failed to uphold the expected standards, Propertymark will also investigate and hold members to account following the submission of a complaint or other evidence.
CMP requirements
If an agent holds any client money, such as rent, money for repairs and even funds that will eventually be protected by a TDP scheme, they must have CMP cover. The legislation protects landlords and tenants should an agency go out of business, or in the event of any other kind of misappropriation.
Once agents are accepted onto a scheme, they must ensure that client money is kept in a separate bank account from business funds. They must also display the correct certificate on their website and in the branch.
However, the case of Carter & Reeves serves as a reminder that once a director resigns, the CMP cover will end as it’s linked to the individual Principal, Partner or Director (PPD). In March 2021, Propertymark received a similar report of a letting agent in Kensington and Chelsea receiving a £20,000 fine – despite applying to join a CMP scheme.
Fine underlines importance of having CMP
Propertymark received a report that a letting agent in Kensington and Chelsea has been issued a fine of £20,000 for not belonging to a Client Money Protection scheme, despite applying to join one. The case underlines the importance of having Client Money Protection (CMP), with Trading standards taking action even when an application is in progress.
Choosing the right CMP scheme
With six government-endorsed schemes available, choosing the right scheme and adhering to the rules is paramount. Propertymark’s CMP is one of those schemes and agents must meet our stringent requirements before being accepted, which include providing:
- Accountant’s Report: or financial ‘Health Check’
- Professional Indemnity Insurance: evidence of the correct level of cover
- Independent Redress scheme membership: there are two government-approved options
- A Fit and Proper Person Test
Credible property agents
As well as the CMP application criteria, wider Propertymark membership provides proof of an agent’s commitment to maintaining high professional standards. Aside from the hand-picked services and preferential rates that give agents a competitive edge, each member is supported to keep up to date with best practices and legislation.
In addition to the above CMP requirements, agents can access CMP cover and apply for full Propertymark membership after submitting the following documentation:
- Information Commissioner’s Office (ICO) registration – for data protection purposes
- Company Declaration Form: completed annually, alongside the agent’s Terms of Business and tenancy agreement
- Money Laundering Regulations: confirmation of registration with HMRC
- The Property Ombudsman Codes of Practice: PPDs must follow Codes of Practice
Members have access to best-in-class CPD qualifications, free legal advice and professional templates/fact sheets breaking down often complex legislation. Regional events also provide a forum for our representatives to share updates and for agents to come together.
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