Letting agents will face fines or closure if they do not have safeguards in place to protect landlord and tenant cash they handle under a proposed new law.
Housing minister Gavin Barwell has confirmed that the government is ready to consult on compulsory money protection in the letting industry after years of misery for renters and landlords who have seen a succession of rogue agents run off with their money.
“We’re accepting these recommendations,” said the minister. “Today we confirmed we’ll require all agent to protect the client money they handle. Will consult shortly on details.”
The announcement followed a review of the letting industry by Labour peer Baroness Hayter.
Their report disclosed 85% of organisations and individuals giving evidence to the review were in favour of the new law.
Client money protection insurance (CMP) ensures customers are paid if a letting agent goes bust while holding money for them.
The review also suggests:
- A fine of up to £5,000 for letting agents breaking the new CMP rules
- Powers to close serial offenders
- A CMP register so landlords and tenants can check letting agents are complying with the law
However, the consultation is expected to ignore CMP schemes run by trade bodies such as the Association of Residential Letting Agents (ARLA) in favour of policing by councils and trading standards.
Despite this, ARLA CEO David Cox said:
“We welcome the review and wholeheartedly agree with their recommendation to mandate CMP for all letting agents. We hope to see the government take forward ARLA Propertymark campaign to improve the industry by safeguarding landlord and tenants’ money through mandatory CMP.”
Meanwhile, ARLA also claims between 4,000 and 16,000 letting agent jobs could go if other measures to ban fees to tenants go ahead.
The fees account for 20% of letting agency income
“Our findings show that landlords are likely to raise rents as a result of the ban on fees,” said Cox.
“Around 41 % of landlords expect to pass on a portion of the inflated cost to tenants, and the research finds they will most likely push rents up by £103 on average per year. If landlords were to pass on the entire uplift in agent fees, tenants would be hit harder, typically seeing rent increases of £275 a year.”