On 3 February the government laid new legislation before Parliament to amend the Client Money Protection Regulations which came into force on 1 April 2019. If the Client Money Protection (CMP) Schemes for Property Agents (Approval and Designation of Schemes) (Amendment) Regulations 2020 come into force they will amend the requirement for agents to open and operate a client account from 1 April 2020 to 1 April 2021.
On 1 April 2019 lettings agents in England who hold client money were required to belong to a government approved CMP scheme. Our previous posts can be read here. In addition to becoming a member of a scheme agents were also required to open and operate a client account for client money. Client money included rent and holding deposits but not deposits themselves, which are protected under tenancy deposit schemes already. However, the CMP Regulations that are currently in force offer a 12-month grace period for agents to open and operate this client account. This grace period was due to expire on 31 March 2020 which meant that from 1 April 2020 all agents were required to open a client account. See our previous post here.
The government is now proposing to extend this grace period from 1 April 2020 to 1 April 2021. Some banks have been reluctant to open these client accounts for letting agents and this appears to be the reason for this extension. The change is expected to come into force shortly, but until it does agents should still be wary and assume that the grace period ends on 31 March 2020. Furthermore, agents without accounts should redouble their efforts to obtain them. If the legislation does come into force we expect it to be in early March this year which leaves very little time for agents to open an account if they decide to wait.
Agents who fail to open a client account could see their CMP scheme membership revoked. If the membership is revoked agents can face a financial penalty of up to £30,000 with an additional penalty of £5,000 for failing to display a scheme certificate properly where appropriate.
Agents who are still unsure about what their legal obligations are and what deadlines they should meet are strongly advised to seek advice.
The contents of this blog post is not legal advice and is provided for general information purposes only. If legal advice is needed readers should contact a solicitor. No responsibility for any information contained within this post is accepted and PainSmith solicitors accepts no liability in respect of the contents or for action taken based on this post.