With the deadline fast approaching where all letting agents in England must have compulsory Client Money Protection, one established supplier has withdrawn from the market, drawing comparisons with Brexit – flawed and running out of time.
It has also emerged that the RICS has yet to have a scheme approved, with the April 1 deadline for compliance now little more than a fortnight away.
A large number of letting agents now find themselves scrabbling to try and get the required insurance in time.
If they do not, they will be trading illegally, and could face fines of up to £30,000.
Lonsdale is the insurance broking business that has withdrawn from the market, despite having offered CMP for five years.
Lonsdale originally came up with its own voluntary scheme at the request of The Property Ombudsman, which wanted agents who did not belong to a trade body to be able to access CMP.
Oliver Wharmby of Lonsdale said that an estimated 4,000 agents still do not have CMP.
He told agents in a letter sent on March 6 that Lonsdale has withdrawn its application for its scheme to be approved by the Ministry of Housing, Communities and Local Government.
He said: “After 12 months of dialogue with MHCLG and with still so much uncertainty, we have lost confidence in the way CMP is being legislated and therefore cannot reasonably continue to provide a CMP scheme to agents in England.”
He has told Lonsdale insured agents that their Professional Indemnity and CMP shall remain in force.
However, with effect from April 1, the CMP section will not be compliant.
Wharmby explained in his letter: “CMP is for the consumers’ benefit and includes a 12-month extended reporting period after the policy expires.
“Consequently, there is no cancellation provision; however, under the circumstances, subject to insurers formally being released of their liability, they have agreed to return premiums pro-rata for the remainder of the period.
“The only way we can achieve this for you is if your new CMP provider confirms, in writing, that your new CMP includes retrospective cover for the period prior to you joining their scheme.
“It is our opinion that retrospective cover does not currently apply prior to new members joining the scheme.”
He said he understands that the approved CMP schemes do not provide retrospective cover.
Meanwhile, he has suggested that Lonsdale agents now get CMP via trade body UKALA, which is offering preferential rates to them, starting at £395.
One agent who received the letter told EYE that their firm had renewed its annual insurance policy via Lonsdale in only December.
Wharmby told EYE that there cannot be any refunds in such cases.
He told us that the whole issue had been like Brexit – “too much uncertainty and no time left”.
He went on: “With only weeks to go and there still being so many unanswered questions, we took the view, as a regulated FCA authorised entity, to pull the plug. Whilst regretful, we felt we had little choice.
“CMP was born due to the insured-backed deposit protection schemes.
“My understanding is that insured-backed deposit protection schemes were never the intention in 2007 and therefore CMP should never have been created. Mandatory CMP does not exist in other professions.
“There is a reason for CMP being legislated and it’s because MHCLG anticipates a high volume of claims post the tenant fees ban.
“I’m certain there shall be claims and we are already seeing the signs.
“What makes me nervous is that there appears to be no infrastructure to police whether the claims are accepted and subsequently paid.
“Trading Standards do not have the resource, and without a central claims notification process nobody knows what claims have been made and if indeed they are being dealt with.
“The approved schemes are largely unregulated and therefore there is no redress for the consumer or agent.”
A spokesperson for the RICS confirmed to EYE that its own scheme is still in limbo.
The spokesperson said: “RICS submitted its application to establish a government-approved Client Money Protection scheme, and we are working closely with the Ministry of Housing, Communities and Local Government to obtain approval of the scheme ahead of April 1.
“We will be communicating with RICS regulated firms over the coming weeks to give updates on RICS’ progress and provide guidance on any next steps that RICS regulated firms may need to take.”
Comments (11)
I think what has to be understood is that reducing the number of firms who will underwrite CMP policies has meant that every single firm who takes out mandatory insurance will be paying at least £96 more than they need to.
I was hoping to provide an ABTA style policy where I policed (monthly) to see all client cash accounts were reconciled and balanced and I would be responsible for any lost money. Instead of woeful audits were agents provide auditors with a dutifully prepared spreadsheet that ties into the physical bank account but does not show any client anomalies systems not in balance would be automatically reported.
There really is an ineptitude in this that defies reason. Good luck to everyone who is effectively having their honesty taxed and exploited.
Our insurance was cancelled as part of this farce, thankfully we have secured a new provider, but it was no easy task.
I think the aim is to close as many independents as possible, leaving only a few big players (ironically the ones responsible for the high fees in the first place).
Only when your own industry is under such over-zealous government attack do you get to experience the way the greased wheels of politics seem to turn against you.
Kevin Hollinrake MP seems rather quiet on all this, I can’t help wondering if his agency (Hunters) will be one of the few which acts like a giant sponge as it benefits from the loss of the independents.
I feel sorry for the landlords and tenants who will no doubt pay more, but lose the personal touch, and the care and compassion that small family businesses bring to an otherwise shark infested cesspool.
Each letting agent should be judged on its merit, we’d welcome the government to seek feedback from every one of our landlords and tenants, past and present, after all we can’t survive without them, and they keep coming to us by recommendation.
That’s not to say that some shouldn’t be shelved, we have an “agent” down the road from us whose record is appalling, and as far as we understand it, doesn’t even have deposit protection, and regularly withholds deposits claiming none was paid. A few of their ex-tenants have told us personally that this was the case (hence the new Mercedes no doubt).
UKALA, which is offering preferential rates to them, starting at £395.
Might not sound much but considering the “real issue” of needing to claim on an agent, is extortionate and is another hole in a letting agents budget, which has been hammered over the last few years with regulations, regulatory fees, admin requirements and now “no fees” scandal. When is someone going to wake up to the problem that letting agents have a limited resource for income to keep pace with these draconian expenses, many will struggle to survive and the managing industry is liable to shrink. Landlords fee’s are set to rise with the knock on to tenants, which labour have vowed to cap.
I’ve long suspected that the Government would prefer larger Corporates in the same way that they are now biased towards professional landlords with lots of properties. They need to be very careful what they wish for in my humble opinion.
What a mess. When Letting Agents go down the pan, it’s usually overnight with their Offices closed and already cleared out. How would the CMP schemes access all the information to ensure any subsequent claims are genuine ? Try getting the Police or Trading Standards to investigate ? No way will they have the resources nor knowledge. Insurance based deposits will need to be dropped and just Custodial allowed. At least that’s the Tenants deposit safe,assuming the Agent protected it.
We have never accepted Insured Deposits, it is always Custodial. I have no interest in the Zero Deposit schemes being touted around, and I am wary of the Council bond-schemes too.
An absolute effing farce.
I’ve been warning of this since September when it became apparent that the provision of CMP was un-underwritable and that competition was being conveniently engineered out of the industry
RICS is cutting it too fine and risks the reputation of its members.
Very poor.
We found out on Friday (by calling HMCLG) that being regulated members of RICS would cover us, and apparently it doesn’t! At the moment there are discussions about if to take out membership with a different body for a year to make sure we are covered, or wait and see if RICS application is approved!
Shockingly badly organised.
This limbo is appalling and of course you could say that the RICS have taken our payments without being honest with us!!!!!!