Although agents already have to declare if they have CMP by law, on 27 March 2017, the (then) Housing Minister Gavin Barwell announced that having CMP will be a requirement for operating a lettings business in the UK, full-stop! With only 3000 agents currently offering CMP voluntarily, thousands more will soon come under the regulation.
Once it becomes mandatory, any agents handling client money without CMP will be fined or even forced to shut down, therefore it's essential to understand what CMP entails and how to protect your clients' money properly.
Why does the lettings industry need CMP?
Despite the majority of honest businesses operating in the lettings industry, there have been reports of rogue agents stealing money from tenants and landlords. Although these are definitely in the minority, cases like these can give agents a bad name with renters and landlords alike, and contribute to negative relationships and even poor property care.
What does CMP cover?
Client Money Protection (CMP) protects the funds that letting agents hold for tenants and landlords, including both rent, repairs monies and any tenancy deposits. It's already a legal requirement for agents to publicly and prominently state whether they have CMP and it will soon be mandatory for all agents to have CMP insurance.
CMP gives tenants and landlords protection in case their money is stolen/misappropriated or if their agent goes into administration. If the agent has CMP, they are secure in the knowledge that those funds could be recovered safely. This covers deposits before and after they are protected in a scheme.
With agents holding almost £3million of clients' money and with SAFEagent revealing at least 1 in 5 renters and landlords' money isn't under CMP, it's right that there are safeguards in place to protect it. CMP means that agents hold the client funds in a totally separate account to the company funds.
How can letting agents get CMP?
With so many tenants with little to no knowledge of CMP (a YouGov study found 61% of tenants wrongly think their money is protected and only 25% of renters have even heard of CMP) stand out to prospective tenants through building their trust. After all, you wouldn't take on a new tenant without running your standard identification, credit and reference checks, so it seems fair for the tenant to have some idea of your credibility too.
As well as protecting your tenants' rental payments, you can benefit them even further by offering them the chance to avoid paying a deposit altogether. With Reposit, tenants can move at a much lower cost by only paying a fee of one week's rent instead of a deposit of up to six weeks. This also means you don't need to worry about registering or protecting the deposit, so you can save yourself time on the admin and money on the registration fee.