Despite its significance it’s surprising how few landlords are aware of CMP, its importance to the industry and its benefits to both landlords and tenants alike. In fact, in an industry where transparency, trust and consumer confidence are key CMP can play a critical role.
What it is:
CMP stands for Client Money Protection and it’s a Scheme that agents can belong to in order to demonstrate to their clients that they have protection in place to cover their funds should they be misused or if a business fails.
The Scheme protects any monies we hold on behalf of our clients, that which doesn’t belong to us as an agency. This could be rent we have collected for landlords or deposits we are holding on behalf of tenants.
These funds are held in a separate ‘ring-fenced’ bank account, a ‘Client Money Account’, which even the bank can’t access should the agent default on their trading account. This helps protect a client’s funds and gives reassurance and confidence to both landlords and tenants.
Being part of a recognised Client Money Protection (CMP) Scheme is extremely important so that both landlords and tenants can be sure that their money is safe.
If your agent belongs to a recognised CMP Scheme you will know that your money is being properly handled and is being securely held in a separate account, and that you won’t lose your money, even if your agent suddenly closes their business. Although people often think this would be an unlikely scenario – it can and does happen! In fact, there are regular news reports highlighting examples of this.
In addition, if an agent is regulated and has CMP they will have their accounts audited each year so landlords and tenants can be sure they’re handling monies correctly. They will be monitored and regulated… they will be answerable and responsible to other authorities. If your agent is a member of a CMP Scheme then you will know that there would be redress to an independent body, such as the Property Ombudsman, should the worst happen or you have a complaint.
Without CMP both tenants and landlords are vulnerable. Tenants, for example, will pay a deposit at the beginning of the tenancy (sometimes up to one and a half times their monthly rent) and when they move out and hand back the property without any damage they could find that their deposit has gone. Likewise, if a landlord gets the property back in a damaged condition, or with rent outstanding, there may not be a deposit available to recover the costs. The same applies if an agent collects rent on behalf of a landlord.
The important thing is that if an agent is regulated and they belong to a CMP Scheme then landlords and tenants alike can be assured that they are protected and they know their monies are being held in a separate Client Money Account that is audited, monitored and strict guidelines have been followed.
CMP gives reassurance and comfort to landlords and tenants. When you’re buying an agent’s products and services you are very often dealing with a stranger and you’re very much buying on the words and feel that you get from the person you engage – CMP is an extra protection that is put in place to make sure you’re not dealing with someone who is unscrupulous.
Ask your agent:
So, how can landlords and tenants find out if an agent does belong to a recognised CMP Scheme?
From May this year it became a legal requirement for agents in England and Wales to prominently display whether or not they belong to a recognised Client Money Protection Scheme. Agents are now also legally required to transparently display all their fees and charges too so landlords and tenants are not faced with hidden costs.
As a member of a recognised CMP Scheme we display this on our website, on our letterhead, on our front door, in our window and we also have leaflets we can give to clients about what the Scheme is and how it works.
If you are unsure, ask your agent whether they are part of a recognised Scheme and ask to see evidence of their membership.
It is very much in the interest of both landlords and tenants to be aware of CMP, it’s importance and whether or not their agent belongs to a recognised scheme – so if you don’t already know… make sure you find out!