Agents will NOT be required to offer Client Money Protection after withdrawal of reform

A clause in the new Housing and Planning Bill, requiring all letting agents to offer Client Money Protection, has been withdrawn after opposition by no less than the housing minister.

He said it would be too much red tape.

Last night, ARLA described the move as “very disappointing” and said it would fight on.

The Clause had been proposed by Teresa Pearce, Labour MP for the London constituency of Erith and Thamesmead.

She said there was industry support for such a measure.

EYE has tabled a petition – on November 27 –  on the Government website, calling for mandatory CMP.

Pearce said: “The new clause is designed to protect both parties in the unlikely event that an agent goes into administration or misappropriates the client’s funds.

“Any losses could be recovered through the scheme.

“The Bill’s extension of banning orders to letting agents has acknowledged that there are times when letting agents do not act in the best interests of landlords or tenants.”

Housing minister Brandon Lewis said he was aware of some support in the housing sector for this measure.

He went on: “We want to ensure that we have a strong and thriving private rented sector that is not tied up in excessive regulation.

“Requiring agents to pay to belong to a client money protection scheme would force honest agents to buy insurance against the risk that they themselves were fraudulent, when, as the hon. Lady said, the vast majority of agencies are not.

“Introducing a mandatory Client Money Protection scheme at this point would be a step too far and would overburden a market that is perfectly capable of self-regulation.

“However, in May 2016 we will review the impact of the transparency measures that were put in place only recently.

“At that stage, I will take due consideration of whether any further action is needed, and obviously I will take into account the comments made this afternoon. I hope that, with those points in mind, the hon. Lady will withdraw the new Clause.”

The clause was duly withdrawn, in a briefing document that few will have seen.

Last night, ARLA managing director David Cox said: “It’s very disappointing the amendment requiring all letting agents to have Client Money Protection has not been successful; especially when so many organisations from across the industry were supportive.

“However, we are pleased the minister has agreed to review the issue again in May.

“We should not be disheartened as it is a positive step that Client Money Protection is now firmly on politician’s radars and being discussed at the highest levels of Government. ARLA will continue to fight for mandatory Client Money Protection as a step on the road to a more appropriately regulated lettings industry.”

As reported yesterday on EYE, the debate on the committee stage of the Housing and Planning Bill lasted a marathon six hours, finishing at 3am yesterday morning.

Some MPs were said to have been tired and slurring their words, with others saying it was a return to the bad old days of all-night sittings, and that it was wrong that important decisions should be taken in the early hours. There were a large number of new government amendments, with some going uncontested – a mark, said critics of the late-night sitting, of MPs’ exhaustion.

The EYE petition on the government website has so far garnered 1,241 signatures – far fewer than we had expected, although it runs until May 26.

So, have we got it wrong? We see this as an important reform in the interests of consumers. But we could be mistaken.

That said, we have certainly reported on cases where agents have scarpered into the sunset without any protection for the landlords and tenants who have been the inadvertent losers.

Your views would be welcome, since with the housing minister’s opposition it would appear that the main assistance consumers can get regarding the safety of their money is via the voluntary SAFEagent scheme.

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14 Comments

  1. Robert May

    So, have we got it wrong? partly- Client money protection as a product that can be bought off the shelf like a copy of Homes and garden  is worthless and  is unlikely to provide the protection it purports to offer, if it does it is like having a  man size plaster  in the shirt pocket of a chainsaw juggler.

    Protection of client money is best achieved through  simple standardised procedures such as separation of duties and compulsory 3rd party audit (that doesn’t mean showing an auditor a spreadsheet facsimile of the physical bank account that many auditors will accept).

    Anyone not capable of operating  separation of duties and meeting minimum standards of auditor’s regulation  should not be allowed to hold clients’  money.

    Those who do should have client money protection provided by the those who the 3rd party auditor is acting on behalf of.

    NAEA and ARLA provide meaningful regulation as do RICS and the Law society.

    CMP should be compulsory but only available through an organisation that is overseeing those holding clients money.

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    1. PeeBee

      Robert – you have been playing this same record now for as long as I can remember… the question is why has no-one seemingly listened to it?

      Does someone know something that you are missing?

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      1. Robert May

        you more than anyone know the how I tend to yitter yatter on with tedious consistency.  This is my specialist subject but I am in exile from having  influence over the industry I shaped for 15 years.

        Because resigned  from a position of credibility I am no longer credible but that does not rob me of the experience knowledge or expertise I have. My communication skills are poor and  so I’m not media friendly.

        Possibly the biggest barrier to comprehesion is that I am challenging the sale of a commercial product and understand why an off the shelf won’t bring about the solution that is promised.  I know intimate details about the client cash accounts of a  very large % of the industry- that was my job.  Off the shelf CMP is not going to solve the  losses or the poor top down (CLG/HMRC) governance of the industry.

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  2. MF

    Brandon said “it would be too much red tape“.

    Brandon went on: “We want to ensure that we have a strong and thriving private rented sector that is not tied up in excessive regulation.”

    Am I reading this???

    Dear Mr Brandon,

    I’ve been running my letting agency business for nearly 30 years.  In the beginning, 100% of my time was spent letting and managing property and running my business. Nowadays, around 50% of my time is spent dealing with red tape and complying with the very many different regulations put upon me.

    Buying an insurance policy to protect my landlords and tenants is hardly something I would describe as “too much red tape”. It’s something I’ve been doing for at least 25 years and it’s no trouble at all. Surely the benefits far outweigh the minimal administration and cost?  Surely the public is entitled to be protected?

    As for discussing these extremely important issues in the early hours…  I wouldn’t want to see my doctor or surgeon at a time when they should be fast asleep. Nor an airline pilot. Nor anyone for that matter.

    No wonder some things went through uncontested. Perhaps it’s done this way on purpose?

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  3. easternagent

    I agree with MF I would hardly call the necessity of having to have CMP ‘unnecessary red tape (UNR)’.  As an RICS and ARLA regulated agent I am duty bound to have CMP in  place and it happens automatically as a part of my membership. I think the government has a double standard here.

    The CPR’s, which I consider to be considerable UNR  were brought in to ‘protect’ the consumer, when the original PMA, had it been properly policed, would have been every bit as effective if not more so.

    It seems to me therefore that a landlord is not, in the government’s eyes, a consumer unlike a buyer/tenant who must be protected, at all costs, by someone for whom he/she is not directly acting as a client.  I believe that to all reputable agents the introduction of CMP would be a ‘no brainer’ and that it would only be the rogues who would object.

    I also agree with Robert May that anyone not capable of arranging CMP should not be allowed to hold client money.  That to me says that the government should go down the route of licencing of both sales and particularly letting agents forthwith. It has never ceased to amaze me over my 48 years in the profession that as agents we are generally dealing with a clients biggest asset and can give advice willy-nilly with no formal training whatsoever.  If  was a financial advisor I would have to be properly qualified to a national standard and then jump through numerous compliance hoops every year.

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  4. seenitall

    “Housing minister Brandon Lewis said he was aware of some support in the housing sector for this measure.

    He went on: “We want to ensure that we have a strong and thriving private rented sector that is not tied up in excessive regulation.”

     

    Hahahahahahhahaha  and another Ha.

     

    NARLS also require its members to have CMP which as others have said is probably the least part of the red tape to arrange.

     

    I have always voted Conservative but ffs the policies recently are just like Stupid.

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  5. Eric Walker

    It’s very disappointing. It seems that much of the legislation and red tape which many see as ‘anti landlord’ are designed as vote winning policies punishing the perception of rich evil landlords and poor hard done by tenants. Meaningful consumer protection should be the priority. In the case of CMP, it’s we agents who have been driving change thwarted by legislators and politicians who will inevitably round on us and call us rogues before the repeated calls for regulation which ironically only they can introduce.

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    1. Robert May

      There is a  competitive solution to the  issue of rogue agency but given that there is no sharp cut off between honest and rogue it is  the ‘sort of  legitimate’ agencies that will block implementation of such a solution as  such agents will be uncomfortable with the leap to what would become the legitimate side of a razor sharp line and the short term costs or ridding the industry of crooks and conpersons.

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  6. easternagent

    I wonder if the Housing Minister subscribes to Eye.  If he did he would get an unbiased, coal face view of what real agents out in the real world think.

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    1. AgencyInsider

      Unfortunately the ‘real world’ is not a place that many politicians are familiar with.

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  7. WPD

    I knew this would happen. I was speaking to a senior ARLA member who thought this was a tentative step by step way to getting the government to agree to compulsory regulation of agents. We need one regulatory body requiring mandatory membership, minimum standards, code of practice with the resources to oversee and power to discipline. Without membership it would be a criminal offence to trade as an agent. Until then, we shall see further declining standards, more and more people ripped off by “agents” who just laugh at people like me with my wall full of certificates from RICS and ARLA, NAEA etc.

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    1. easternagent

      Well said WPD.  I couldn’t agree more.  Pity Mr Brandon and his colleagues don’t get it.

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    2. Robert May

      Other than a minor adjustment in thinking by good agents like you WPD a solution has already been built that will remove the incentive for rogue agents  to be in the industry.

      If the Guardian Media group  had had the wit to understand the opportunity in its grasp at the time rather than whittling about short term profits, the industry would be  in a very different place right now, this  story would be unnecessary, no rogues would exist and the economy would be several  £billion better off.

      As a very wise Michael Portman said to me  (2010) “nothing drives change like a crisis, be patient”

      Obvious question; Is PSG in a position to implement the change necessary? not any more it isn’t.

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  8. HeadofRedress

    The Property Redress Scheme is an organisation that supports compulsory Client Money Protection, and, as Head of Redress, I am disappointed that the Government are not proceeding to consider this further.
    The industry has clearly stated that whilst the vast majority of agents play by the rules, a minority tarnish the reputation of the rest.
    The housing minister is calling for a reduction of red tape, but I would like to make the point that it is important that the consumer, both landlords and tenants, have the assurance that they will recover their losses if their money goes missing. In my opinion, this does not amount to red tape, but nothing more than what we do for our cars, houses and possessions. I hope that Mr Lewis changes his mind after the review in May

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