Protect My Money

The Housing and Planning Act 2016 is finally here although it will probably not be in force until early 2017. One of the late amendments to the Act finally introduced compulsory client money protection for agency work. This is something that landlord and tenant groups and most professional agent bodies have been seeking for some time and so it is likely to meet with general approval. Oddly it is something that most members of the public actually believe exists already. As with much of the rest of the Act this element of the Housing and Planning Act this segment permits the Secretary of State to make (yet more) regulations to bring this into force rather than simply saying what is required on the face of the Act. The provisions are found in section 133-135 of the Act.
As has been seen with redress schemes and deposit schemes the Act allows for both private schemes to be created as well as ones approved by the government. In fact, while state approved deposit schemes exist there is no state-backed redress scheme and I doubt there is really a need. Clearly no scheme is going to be free and there are already professional bodies doing this so I would guess that they will all seek approval and obtain it and the government will steer clear of the substantial investment needed to get involved in this area.
Interestingly the definition of property agency is wide and goes further than most of the calls for CMP schemes made before. Most of the calls are more targeted at lettings agency work. The definitions of property agency in the Act covers management work as well. The definitions are set out in sections 54 and 55 of the Act but they will include, as well as traditional letting agency, acting to find properties for tenants (commonly called relocation agency) and all types of property management including the management of leases of up to 21 years. Therefore long lease management is excluded although there seems no particularly good reason to do so. Long lease management is not excluded from the requirement to join a redress scheme for example and long lease tenants would probably welcome a greater degree of security for money paid into sinking funds.
This will also link up with the Consumer Rights Act. This Act requires agents to publicise their fees on their website and in their offices. However, it also requires all agents to publicise their membership of a redress scheme and their membership (if any) of a client money protection scheme. Once a compulsory CMP requirement comes into being this will then need to be published. Oddly, an agent who was not a member of a CMP scheme could then potentially be punished twice. Once for not being a member of a scheme and again under the CRA for not displaying that non-existent membership.
As is the current fashion, the Act makes provision for enforcement to be by the local authority and permits them to levy fines which they will presumably be able to retain to fund the cost of enforcement. However, local authority enforcement of the requirement to join a redress scheme or to display fees has been extremely patchy (by which I mean largely non-existent) so far and so it remains to be seen how effective this will be. It might have been much more effective for the government to also allow for civil enforcement, as with deposit protection, by allowing landlords to not pay agency fees where an agent did not have a CMP scheme or tenants to withhold the rent (or a portion of it) where such a scheme did not exist. This would have been much tougher in pushing the less compliant component of the agency sector into signing up.

About D

D is a solicitor specialising in landlord and tenant matters with a London firm.
Posted in General topics, Housing law - All.

9 Comments

  1. This is clearly only as good as the enforcement….
    .
    Personally I would like to see the internet portals being responsible for checking an agent has client money protection and membership of a redress scheme. Not being able to put a rental property on RightMove, SpareRoom, etc would have a lot more effect then the small possibility of a call from the council.

    Removing limited liability from the directors and controlling share holders along with make the management staff personally liable if an agent does not have money protection may also be effective.

  2. Client accounts is good practice, but if CMP was indeed something landlords wanted then they would demand it from agents and agents would have to comply or close shop.

    Clearly this isn’t the case so one has to wonder where this legislative urge comes from…

    • Remember most landlords choose an agent at a time when they know nothing about renting out a property as they have a property they can’t sell and wish to move for work etc. Also lots of bad agents claim they have CMP when they don’t.

      I can choose a lawyer, and check on the law society website and know they are well regulated if they are listed, and that they ARE a fake if not listed. Hence lawyers are trusted; agents (and therefore landlords) are not trusted, due to not having a simple way to confirm an agent is OK. (The law society will pay out if they list an lawyer due to the lawyer deceiving them until any of the bodies that agents are members of.)

  3. Can I just defend some councils here, including mine, that are enforcing the redress scheme order. As it happens, every letting agent in our area (that we are aware of at least) is a member of a scheme. A very small number were not compliant when the order first came into force but they quickly joined a scheme after receiving our initial notice. We take a graded approach like I imagine many councils do.

    Unless you were a letting agent or property manager that was not compliant and received a notice from us, you’re unlikely to know that we’re enforcing it. But that doesn’t mean we’re not. Perhaps we’re the minority.

    • Paul,
      Good to hear you are on top of this. How do you find about all agents in your area? What about agents that don’t have formal high street offices? (E.g. R2R operators.)

  4. Pingback: Housing and Planning Act 2016 and the Immigration Act 2016 » The Landlord Law Blog

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