For some time now industry representatives have been campaigning for it to become a mandatory requirement for letting agents to offer Client Money Protection (CMP).
A few weeks ago, the campaigners were handed a breakthrough when amendments regarding CMP were made to the Housing and Planning Bill.
With all this going on, we've taken a look at the importance of CMP and what could happen next.
What is CMP?
Client Money Protection protects client funds held by a letting agent such as rent and tenancy deposits.
If an agent misappropriates or steals client money, tenants and landlords can recover their funds if they were held with a CMP scheme.
According to SAFEagent, the UK's letting agents currently hold almost £3 billion of clients' money. Those who offer CMP hold it in a completely separate account from the one which holds the firm's operating funds.
Currently, around 3,000 agents voluntarily offer Client Money Protection although, according to SAFEagent, at least 1 in 5 renters and landlords are still not protected.
CMP is offered by a number of providers, including ARLA, the Law Society, NALS, RICS and UKALA.
Meanwhile, SAFEagent is a kite-mark scheme which denotes firms that protect clients' money through CMP schemes and is recognised by the Government and Citizens Advice Bureau as well as a number of industry organisations, including The Property Ombudsman.
Last year, as part of the Deregulation Act, as well as the disclosure of all fees, it also became mandatory for letting agents to state whether or not they offer CMP to clients.
Although it's gaining significant ground within the industry, it seems CMP is still relatively unknown among the public.
Some 61% of tenants erroneously think their money is automatically protected by law, according to YouGov research, commissioned by SAFEagent.
What's more, the study found that only 25% of renters had heard of client money protection schemes.
The industry has been working hard to increase the profile of CMP with events like SAFEagent Awareness Week, which is now in its fifth year.
Why is mandatory CMP edging closer?
The campaign for compulsory CMP has been in and out of the House of Lords over the last couple of years – with many proposals and an equal number of rejections.
Back in November 2014, Labour's Baroness Hayter argued unsuccessfully for the Consumer Rights Bill to be amended to include mandatory CMP. At the time, Housing minister Brandon Lewis told SAFEagent that he had no plans to introduce compulsory CMP.
Fast forward a year to November 2015 and the campaign for compulsory CMP took a step forward when the managing director of the Association of Residential Letting Agents, David Cox, submitted an amendment to parliament for the incoming Housing and Planning Bill to include the measures. The proposal was backed by a coalition of 27 organisations, which included industry bodies, homeless charities, law firms and redress schemes.
In January, a clause for the Housing and Planning Bill, put forward by Labour's Teresa Pearce, was rejected, again by the Housing Minister.
Brandon Lewis said mandatory CMP would see letting agents faced with too much red tape and that it would be 'a step too far and would overburden a market that is perfectly capable of self-regulation'.
He went on to say that the position would be reviewed again in May.
In February, Baroness Hayter and Lord Kennedy tabled another amendment for the Bill to include mandatory CMP. However, it was another amendment made by Hayter and Lord Palmer which finally made the breakthrough.
While falling short of asking for all agents to offer CMP, the amendment – which was added to the Bill at report stage in April – proposed to ban agents from taking money from tenants unless they hold separate client money accounts.
The approved amendment will require the Government to review the need for a mandatory measure at a later date.
The Housing and Planning Bill received Royal Assent last month, and it sets out a number of measures regarding CMP, including the 'power to require property agents to join client money protection schemes'.
John Midgley, Chair of the SAFEagent Steering Group, recently commented: “Consumers who use agents without CMP in place are taking a massive risk. Who can afford to lose thousands of pounds?”
“While we are finally getting closer to mandatory CMP, we aren’t there yet.”
Including measures relating to Client Money Protection in the Housing and Planning Bill is seen by most as positive news for the industry.
As the Government moves closer to introducing compulsory CMP, this will help to build on the positive reputation of letting agents among landlords and tenants as well as protecting consumers from rogue operators.