New rules to protect rent paid by tenants to letting agents, will fail to provide adequate protection for landlords.
From April next year, all letting agents in England will need to be members of a government approved Client Money Protection (CMP) scheme.
These schemes protect the rent a tenant pays to a letting agent to pass onto their landlord – for example if an agent went out of business.
However new details, revealed by the government today show:
- The level of insurance held by CMP schemes will not cover the full value of the rental money held by the letting agent.
- The CMP schemes will not pay out in certain circumstances.
- CMP schemes will be able to cap the amount they pay out, in the same way as the Financial Services Compensation scheme.
The RLA is warning that there will be a considerable risk to landlords, particularly those with large portfolios, of not receiving all the money they are owed.
It is advising landlords to spread their properties across a number of agents to reduce the risk.
David Smith, Policy Director for the RLA said: “It is right that money provided to agents by tenants for landlords should be protected.
“It is disappointing that the government’s plans will not offer full protection and we urge Ministers to think again or they will undermine confidence in the scheme.
“Otherwise we will encourage landlords to ensure that they do not put all their eggs in one basket and spread the risk.”