Hundreds of thousands of pounds of money held as deposits for tenants is not being protected by client money protection (CMP): Approximately 20 per cent of landlords and tenants are not protected by CMP, according to YouGov research.
The money has been collected by the letting agents but not put in the scheme, which means that landlords and their tenants are at risk of losing the money. In the UK, letting agents are responsible for more than £2.7 billion in rental payments and tenancy deposits.
However, the YouGov research shows that about one-fifth of this money could not be recovered if the agent uses it fraudulently or simply steals it. CMP protects the money held by agents so that landlords and tenants have the ability to recover these funds should an agent misuse them.
The research also reveals that 61 per cent of tenants wrongly believe that their money is protected by law and only one in four was aware of CMP protection. These findings show the importance of events such as SAFEagent Awareness Week. To stress the importance of CMP when using a letting agent. SAFEagent is campaigning for CMP to be mandatory. The chairman John Midgley pointed out that you would not use a travel agent which was not protected by ABTA, so why use a letting agent without CMP protection?
CMP enables landlords and tenants to feel confident that their money is safe and that they can trust a participating body. The scheme also means that should a landlord, tenant or management company lose their deposit, they can claim compensation through the scheme. Compensation can be up to £25,000 but landlords’ claims are limited to a maximum of 3 months’ rent.
It is also possible to check that an agent belongs to the CMP scheme by searching online. By increasing awareness of the protection plan, more tenants will be steered towards professional landlords and agents rather than into the hands of cowboys or unregistered bodies. If more tenants were aware of it, they would start to question why an agent or company would not wish to belong to such a scheme.
Agents and management companies which are part of the scheme should advertise the fact to demonstrate that the money is protected and that everything is above board. A logo could be added to the website, stationery and email signatures to show membership.
Telling tenants about CMP and holding new tenants’ deposits within the scheme could be added to your checklist when checking in or checking out tenants.
Software such as InventoryBase is the easiest way in which to manage such a ‘to do’ list when renting out property as all the information and back office data is in one place. It also ensures that you do not forget a part of the procedure because it is all visible within the app. You can share the information with your office team, so that everyone is kept up to speed regarding the various properties in the portfolio.