Client money protection schemes serve as a type of insurance intended to safeguard funds held by property professionals, specifically letting agents. These schemes aim to assure compensation for landlords and tenants should an agency face financial difficulties, such as going into administration.
Defining client money: Client money encompasses any funds held in advance on behalf of landlords or tenants. This includes rent, holding deposits, security deposits (before placement in a deposit protection scheme), and advance payments for bills, repairs, or maintenance work.
Approved client money protection schemes
There are presently six government-approved client money protection schemes:
Exemption from client money protection schemes:
These schemes exclusively apply to letting agents operating in England. Letting agents outside England may adhere to alternative schemes:
Requirements for joining a client money protection scheme:
To participate in a client money protection scheme, agencies must hold their clients’ funds in an account with a bank or building society authorized by the Financial Conduct Authority. Additionally, agencies are expected to implement robust procedures for handling client money.
Verification of membership:
Agencies must prominently display the membership certificate from an approved client money protection scheme in all premises and on their website. It is advisable to publish the certificate on third-party websites and alongside property listings. Upon request, agents must provide a copy of the certificate, free of charge.
Penalties for non-compliance:
Since April 1, 2019, agencies failing to join an approved client money protection scheme can face fines of up to £30,000. There is no transitional period for this regulation. Additionally, fines of up to £5,000 may be imposed if agencies do not display or provide their membership certificate when requested.
The information in this post is valid to the best of our knowledge on the date of posting. It is advised that you seek independent advice based on your individual circumstances.
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