When you’re selecting a letting agent to manage your rental properties, it’s vital to pick the right one. There are plenty of good agencies around, but unfortunately not every agency meets the minimum standards. Picking the wrong one could leave you in financial trouble.
No doubt you have a list of questions for any prospective letting agency, but does this include whether they’re a member of a client money protection scheme?
Why Client Money Protection Schemes?
It’s a legal requirement for letting agents in England to belong to one of the available client money protection schemes. These provide insurance for both the landlord and the tenant in the event of the agent stealing any client money.
The term “client money” refers to any money held by the letting agency on a temporary basis on behalf of either the landlord or the tenant. The most obvious example is rent, which is collected by the agency from the tenant and then passed on to the landlord. Other examples may include a holding deposit or float funds, which are held by the letting agency but don’t belong to it.
What Can You Expect from Your Letting Agency?
So how can you tell whether the letting agency you’re considering, or one you’re already working with, is fulfilling its obligations with regard to a client money protection scheme? Well, there are various things you can look out for.
- The agency is legally required to inform you of which scheme it belongs to.
- The certificate of membership with the scheme must be displayed prominently on the agency’s website and in each physical branch.
- You’re entitled to request a copy of the agency’s certificate.
- You can confirm membership through a search on the scheme’s website.
- The agency must hold client money in a separate account that’s regulated by the Financial Conduct Authority.
- The agency must have money handling procedures in place, which you can ask to inspect.
- The agency must inform you if it changes to a different scheme.
What Can I Do if the Agency Fails to Meet Its Obligations?
If an agency that’s handling your properties appears not to have an adequate client money protection scheme in place, that means it may be breaking the law. You’re entitled to inform any local authority, which can enforce against the agency, who can be fined up to £30,000.
Since belonging to a client money protection scheme is a legal obligation, failure to do so would normally entitle you to terminate your agreement and look for a compliant letting agency. However, if you find out about this the hard way, by having money withheld, you’ll need to recover your money through normal debt recovery means. Give me a call to find out how I can help.