The clock is ticking for unscrupulous letting agents who steal cash from landlords and tenants as the government makes the first moves to change the law to make protecting client money compulsory.
The buy to let industry has been plagued by rogue letting agents who see their customers as cash cows and run off with their money.
Now, the Department for Communities and Local Government is reviewing how voluntary money protection schemes are working – with a view to making them mandatory if they are not.
Money protection protects landlord and tenant cash held by the letting agent should their business fail or if the money should be stolen while lodged with them.
The DCLG estimates that letting agents hold £2.7 billion for landlords and tenants.
“Participation is currently voluntary and we estimate around 60% – 80% of agents already offer client money protection,” says a letter from the working party calling for evidence.
“The government’s concern about making client money protection mandatory is that requiring agents to pay to belong to a scheme would force honest agents to buy insurance against themselves being fraudulent. Something the vast majority of agents are not.”
The letter asking 17 questions about client money protection was sent by a DCLG working party headed by Housing Minister Gavin Barwell.
The power to make client money protection compulsory is written into the Housing and Planning Act 2016, but has not yet been triggered.
A protection scheme would make letting agents keep client money separate from their business cash flow.
“It was the government’s view that with this the balance of regulation for letting agents was about right, and we need to allow time for the transparency measures to bed in. The government is committed to review the broader transparency measures later this year,” says the letter.
Consultation ends on October 3.