From April 1 2019 it became mandatory for all letting agents to sign up to a registered Client Money Protection scheme. We welcome this step as it provides reassurance for landlords and tenants that any funds being handled by their property agent – whether commercial or residential – are fully protected if the agent were to cease trading.
The new regulations will help ensure that the entire market will be compelled to protect client funds to levels similar to those operated by reputable agents such as Hicks Baker for some time. Firms that fail to comply with the legislation can be fined up to £30,000.
The Government estimates that over £2.7 billion is being held by commercial and residential agents on behalf of their clients, typically as rental payments or deposits. There have been several cases where agents have suddenly ceased trading, become bankrupt or even absconded, leaving landlords and tenants seriously out of pocket.
How it Works
What We Do Registered Client Money Protection schemes ensure that client funds can always be recovered should the worst happen. To be accepted by a scheme, agents need to demonstrate that they have sound financial controls in place, ensure that client money is held in an account authorised by the FCA and have appropriate professional indemnity insurance.
The above points serve to highlight the type of financial due diligence that commercial landlords should always do before signing up with a property agent. The new regulations don’t completely remove the need to do this. The ability to reclaim lost funds should be seen as a last resort and it’s preferable to work with a reputable agent to minimise the risk of ever having to make a claim.
Landlords should satisfy themselves that the scheme used by the agent is authorised by the Government and that membership is current. It’s also worth checking independently how the agent manages client funds.
What We Do
Hicks Baker has always taken the protection of client money very seriously; for us it’s a feature of being a reputable and ethical business.
As a RICS regulated firm we are part of the RICS Client Money Protection Scheme, which is approved by the Secretary of State under the Client Money Protection Schemes Property Agents (Approval and Designation of Schemes) Regulations 2018.
