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Compulsory CMP will bring industry one step closer to transparency

The introduction of compulsory membership of a Client Money Protection (CMP) scheme for letting agents, alongside a raft of other regulatory proposals, will ensure the private lettings sector in England is more transparent than it has ever been.

This is the opinion of automated rental payment provider PayProp in response to the launch of an official consultation period for compulsory CMP and ahead of this week’s Budget.Earlier this month, the Department for Communities and Local Government launched a six-week consultation, seeking views on how compulsory CMP membership should be designed, implemented and enforced.

A welcome step, but a long time coming

The government first made provisions to introduce compulsory CMP in the Housing and Planning Act of 2016, after years of campaigning by industry groups like SAFEagent.

Then, in March this year, it announced its intention to use these powers, before launching a call for evidence.

“It takes a while for any government legislation to be passed, but for compulsory CMP membership to even reach consultation stage has taken longer than most,” says Neil Cobbold, Chief Operating Officer of PayProp in the UK.

“We trust this means a lot of thought has gone into enforcing the legislation.”

CMP goes hand-in-hand with minimum training requirements

Once CMP scheme membership becomes mandatory, non-compliant agents will no longer be able to operate since being a member of a scheme will be a requirement to trade.

PayProp notes the consultation document sets out that compulsory CMP scheme membership will run alongside the proposed plan for minimum training requirements and an industry code of conduct for agents.

“It seems like a perfect fit,” says Cobbold, who is also an expert panellist on Property TV’s Property Question Time on Sky Channel 198.

“It’s estimated that around 60% of agents are already members of CMP schemes but this will bring the remaining 40% in line,” he adds.

“Pairing the legislation in this way also means agents will be starting from a level point of compliance and practice which can only be considered a positive step forward for all involved.”

What are the benefits of compulsory CMP membership?

Industry estimates suggest that letting agents hold around £2.7 billion of client funds. As this figure continues to rise and the private rented sector continues to grow, it is necessary that this money is protected for agents as well as landlords and tenants.

Client Money Protection schemes are relatively inexpensive, costing the average agent between £300 and £500 each year. This small annual cost makes a big difference when it comes to transparency and trust.

“Mandatory CMP membership for agents demonstrates the industry’s willingness to accept higher professional standards and champion a more transparent and regulated marketplace,” says Cobbold.

“This could contribute towards improving the reputation of lettings professionals among the public, which could be in turn be one of the most significant benefits of this legislation.”

Looking ahead to the Budget

With the CMP consultation set to run until December 13, it remains to be seen if any details of its implementation date will emerge in Wednesday’s Budget.

“We hope Phillip Hammond gives more details about the ban on upfront letting agent fees now that the draft Bill has been published,” says Cobbold.

“And along with the rest of the industry, we look forward to promised details about regulation measures announced at the recent Conservative Party conference, including mandatory redress scheme membership for landlords and minimum training requirements for letting agents.”