Whither CMP

Late on 27 March the government published the report of its review into Client Money Protection (CMP) for letting agents.

It is important to understand that this review predates the statutory obligation to have CMP as required by the Housing and Planning Act 2016. Therefore the report is to some extent cut across by that Act and some of its recommendations may now be irrelevant.

The review was undertaken by a very small group led by Baroness Hayter and Lord Palmer. While it purported to have direct input from the Private Rented Sector this input was primarily from the BPF who have little involvement or interest in the PRS beyond larger corporate landlords. Evidence was taken from other groups but this was relatively limited in scope.

The committee unsurprisingly recommends that CMP should be introduced. It noted that many landlords and tenants still assume that a letting agent is already regulated and so from that perspective the market already expects CMP. It was also noted that most landlords and agents are unaware of what they should do if their agent goes into receivership or liquidation and they are as likely to contact the police as any other source.

The committee’s primary recommendations are at odds with the current legislative requirement. The Housing and Planning Act (H&PA) simply allows for regulations to be made by which a local authority can enforce CMP through local penalties. The Committee recommended that the punishment for trading without CMP should be for the agent to be banned from trading altogether. This is not possible under the H&PA and would require further legislation.

The Committee also called for a light touch national register of letting agents. In practice this now exists in all of the devolved regions and would gain support from professional bodies in England. However, it would be likely to morph in to a register of landlords as well and so would be opposed by landlord bodies. Again this would require further legislation and so must be seen as something for the longer term.

The Real Future

There is little prospect of the suggestions made by the committee becoming law in the near future. Compulsory CMP has been introduced by H&PA and there is little doubt that it will be brought into force, probably in October 2017. The enforcement is likely to be through fines levies by local authority trading standards officers and these are likely to be relatively low. The reality is that the new report sets out some detail about how a CMP scheme under the H&PA might operate but is largely a set of requests that cannot be fulfilled without further primary legislation. That said, the government has committed to banning letting agent fees which will also require primary legislation and this is expected in 2018. Adding this in might turn that piece of legislation into a larger housing bill which would accomplish a larger set of changes.