Sean's January Blog

Last week I made my way to the House of Lords for the first 2016 meeting of the Property Redress Scheme Advisory Council. I travelled down to Westminster with a Council Member who happens also to be a near neighbour.

Paul Shamplina of Landlord Action is an old hand at Westminster, having served his time, (and continues to do so), on a number of advisory groups and panels helping Parliamentarians understand the complexities of the letting and property industry and hopefully make good legislation. 

We were just through the barriers at the tube station when Paul turned to me and said “Did you see who that was?” I turned to see the back of the head of none other than Brandon Lewis MP, the current Housing Minister, disappearing down the Jubilee Line escalator. Ironically Mr Lewis, or more accurately one of his recent decisions was going to feature in my report to the Council.

Mr Lewis had just last week announced that the introduction of mandatory Client Money Protection had been removed from the proposed Housing and Planning Bill. The Bill had been discussed in the House of Commons at committee stage and whilst the proposed amendment failed and was withdrawn, Mr Lewis agreed to consider the introduction of mandatory client money protection again in May.

This decision was made despite there being universal support for the amendment from industry representatives such as ARLA, UKALA, RICS and NALS, the redress schemes, the deposit protection organisations and the CMP awareness organisation, Safe Agent.

In addition a petition launched by Property Industry Eye in favour of the introduction of mandatory Client Money Protection had gained 1,241 signatures by property professionals before the withdrawal of this part of the bill.

Brandon gave the reason, that he felt that the introduction of compulsory CMP would be another layer of red tape on an already overburdened industry.  Fair enough you might say, but before you loudly applaud, consider this.

As an organisation that supports compulsory CMP, I am disappointed that the Government did not take the opportunity to introduce mandatory client money protection now. The industry has clearly stated that whilst the vast majority of agents play by the rules, the crooked minority tarnish the reputation of the rest. There have been various calls for registration, compulsory accreditation and the professionalising of the industry and in the mind of Mr Lewis these are a step too far and he has warned against the bureaucracy and cost of such moves. In his opinion CMP is part of the regulation ‘sledgehammer to crack a nut’. Which side of the argument you fall on I leave you to decide.

However, I will make one point. Client money protection is about third party protection not regulation, what is important is that the client (landlord and tenant) has the assurance that they will recover their losses if their money goes missing. On this basis it would be up to the schemes to underwrite the risk and ensure their criteria are met as condition of the cover.

This is not red tape but no more than we all do to protect our houses, cars and possessions.  Additional regulation and accreditation is a separate matter and whilst there is a strong argument that consumers would benefit from better educated and policed agents, there are different arguments related to this. I hope after a period of reflection and his review he can be persuaded to change his mind but I also caution the industry not to over egg the pudding and push for too much too soon.

All agents should be able to purchase CMP cover simply and cheaply and this means it must be also available outside membership of a trade body or accreditation scheme.  This will allow the cover to be universally available and not subject to a set criteria that however desirable is unachievable for a large number of well run, reputable businesses.  There would need to be entry requirements but these would be based on financial considerations, such as credit score and bank assurances that the agent is fit and proper to handle other people’s money.

It was in the light of these aims that a membership scheme called Client Money Protect (CMP) was created. It allows agents to join by showing that they are reputable and handle client money properly. The agent then pays an annual fee for their membership and their clients can benefit from client money protection should that agent misappropriate the money. The client would have to put in a claim which would be assessed. This is exactly how the trade bodies work their client money protection scheme. CMP does not seek to replace the role of the accreditation and training, nor is it a vehicle to sell you other cover such as professional indemnity insurance which you may or may not need. What it does is provide its Member’s customers with the peace of mind that there money is safe.  All this for a cost less than insuring your mother to drive a smart car!

I leave you with this thought; the current law requires you to display a sign telling your customers whether you do or do not have client money protection insurance.  There is a substantial fine for not displaying this sign, but who in their right mind wants to advertise that if something goes wrong their customers lose their money. Rather than this dilemma would it not make sense for client money protection to be a must have and level up the playing field?