What is Client Money Protection?
From the 31 January 2018 client money protection insurance (CMP) becomes a mandatory requirement for all letting or managing agents in Scotland under the new Letting Agent Code of Practice.
CMP ensures that the landlord and tenant clients of an agent are reimbursed in the event their agent goes into administration or misappropriates the client funds in their control.
Similar to ATOL or ABTA in the travel industry, CMP is there to protect the consumer. It does this in two ways:
Imposing a selection of rules for membership that sees an agent incorporate best practice and mandatory compliance into their daily processes; and
Providing a compensation scheme to landlords or tenants effected by agents going into administration or misappropriating client funds.
Where can I get CMP?
CMP is generally only available to members of industry trade bodies such as ARLA:Propertymark, National Approved Lettings Scheme (NALS), RICS and United Kingdom Association of Letting Agents (AKALA).
In order to gain this valuable added layer of protection for clients, you have to choose a trade body and meet their joining criteria, pay their membership fee (anywhere between £150 to £650) and then you will be able to apply for their CMP.
You will pay a CMP admin fee and an annual ‘levy’ to add to the protection pool of money that the body holds. Most trade bodies only let an agent use the CMP product they operate.
What if I do not want to be part of a trade body?
Client Money Protect is now recognised by the Scottish Assembly as an alternative to trade body sourced CMP. It is a membership scheme that is only concerned with protecting your clients’ interest in the client money you hold.
The majority of agents qualify for standard, flat membership fee of £299 + VAT. However, if business is going well and you hold over £500,000 of client money in your client bank account then Client Money Protect can put together a tailored package for you. If you contact Client Money Protect tell them you are mydeposits Scotland Members they will offer you the best price available at that time. Alternatively, UKALA also offer CMP backed by Client Money Protect as part of their membership so by joining this trade body you get the best of both worlds - membership of a recognised and robust CMP scheme (underwritten by RoyalSunAlliance) and membership of a trade body.