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Client Money Protection Consultation

The CMP consultation is open until 13 December 2017. The Consultation ‘seeks views on the implementation of mandatory membership of a client money protection scheme for property agents.’ The proposals will only apply to England for now.

Landlords and tenants pay money to agents for a variety of reasons including rent and repair budgets. It is estimated that these property agents hold approximately £2.7 billion in client funds. So, it is important that those handing this money over feel confident that their money is safe. Consequently, where agents are members of a CMP scheme landlords or tenants that have not been repaid can seek compensation.

Membership of a CMP scheme is currently not mandatory but approximately 60% of agents are members. Previously we posted on the Housing and Planning Act 2016 and the government’s intention to create a mandatory CMP scheme. We are now one step closer to that happening. The 2016 Act permits the Secretary of State to bring in legislation requiring agents in England to be a member of:

  • A client money protection scheme that is approved by the Secretary of State; or
  • A client money protection scheme that is Government – administered and designated by the Secretary of State as such.

When bringing in any such legislation the Secretary of State can impose requirements on scheme providers as to the nature of the scheme, about how applications should be made for approval and the conditions that need to be satisfied in order to obtain membership. Transparency is also again important because any legislation will place an obligation on agents to:

  • obtain a certificate confirming its membership of the scheme;
  • display or publish the certificate; and
  • produce a copy of the certificate on request.

We have of course seen this transparency obligation before with the introduction of the Consumer Rights Act 2015 and the requirement that agents publicise their fees and tariffs.

Last year’s call for evidence received 54 responses. 85% of the respondents supported mandatory CMP schemes on the basis that it would improve the reputation and professional standards in the industry. There are of course examples of agents misappropriating funds which is why many see a need for the scheme. However, where agents do not handle such funds they will not need to become members of a scheme.

Prior to obtaining membership the Secretary of State may impose regulations which require agents to have sufficient insurance. The call for evidence found that respondents did not want new agents to be penalised for a lack of experience. Scheme providers will need to satisfy themselves that agents are eligible for membership and new members could do this by demonstrating experience, training, qualifications or even using a custodial scheme for rent payments initially.

The government will consider which authority is best placed for enforcement. Data sharing will of course also help with enforcement and again we have seen data sharing before too. Property redress schemes notify local authorities if an agent is expelled from their scheme. Finally, any the sanction for non-compliance is likely to be a financial penalty.


When, and we believe it is a matter of when, this becomes law, agents will have a grace period prior to obtaining any membership. Such a grace period will hopefully be long enough for agents to get all that they need for a successful application for scheme membership. However, despite such a grace period we do recommend that agents do their research so that they are not caught out.

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