Client money compliance for estate and letting agents
Legislation in the private-rented sector is changing all the time. One of the most important laws is compulsory Client Money Protection (CMP), which protects the money agents hold on behalf of their clients. We help you set up the systems, accounts and reports the rules require.
Your key obligations
A quick checklist for agents handling client money.
- 1Belong to a government-approved Client Money Protection scheme
- 2Hold client money in a separate account with an FCA-authorised bank or building society
- 3Display your CMP certificate in your office and on your website
- 4Have estate agency client accounts examined by a qualified auditor within six months of your year end
- 5Keep accounts and records for six years
If you are unsure about any of these, we can review your position.
What is Client Money Protection?
CMP protects the money agents hold on behalf of a client. But why do landlords and tenants need to understand how the legislation could help them?
It’s estimated that letting agents hold around £3 billion of client money. From 1 April 2019, all agents need to belong to a government-approved CMP scheme to safeguard these funds. The scheme pays landlords and tenants back if an agent ‘misappropriates’ the rent, deposit or other client funds.
The legislation also means letting agents need to prove that they are handling clients’ money in the right way by:
- Holding this money in a separate bank account to their operating funds
- Having indemnity insurance so the money can be reclaimed if any employees commit fraud
What does CMP cover?
Client money includes landlords’ repair funds, rents, service charges and arbitration fees. CMP is different from tenancy deposit protection (TDP). However, CMP covers tenancy deposit money while it is with the agent, that is before or after it is protected by a TDP scheme.
Who does not need CMP?
Agents who do not handle any client money, for example those who only offer landlords a tenant-find service, will not need CMP. If you collect rent, hold deposits or manage repairs on a landlord’s behalf, you will.
Approved CMP schemes
You can join any of the following government-approved schemes:
Client Money Protect
Government-approved client money protection scheme.
Money Shield
Government-approved client money protection scheme.
Propertymark
Client money protection for Propertymark members.
RICS
Client money protection for RICS-regulated firms.
Safeagent
Previously NALS.
UKALA Client Money Protection
Client money protection for UKALA members.
You must
- Hold your clients’ money in an account with a bank or building society authorised by the Financial Conduct Authority
- Get a certificate confirming membership of the scheme you join, and provide it to anyone who asks, free of charge
You must display the certificate
- In any office where you deal with the public
- On your website
How to handle clients’ money
Holding deposits, keeping client accounts and paying interest. Talk to us about the detailed requirements under sections 12 to 15 of the Estate Agents Act 1979 and the Estate Agents (Accounts) Regulations 1981 for handling clients’ money.
Deposits
If you hold a deposit, you are holding money on trust (or, in Scotland, as an agent) and must account for it very precisely. There are two types:
- Pre-contract deposit: paid before exchange to show a serious intention to buy. In Scotland, it is against the law to accept one.
- Contract deposit: paid at exchange of contracts.
Deposits must go into a client account set up for this purpose at a bank or other authorised institution. Money from a connected contract, such as carpets or curtains, can go in too, but no other client money. Rents from lettings or property management cannot be paid into the estate agency deposit account.
Keeping client accounts
When you keep a client account, you must:
- Pay clients’ money in without delay
- Keep detailed records of all transactions
- Give detailed receipts for all money you receive
- Have your accounts examined and reported on by a qualified auditor within six months of the end of your accounting year
- Be able to produce your latest auditor’s report if an authorised person, such as a trading standards officer, asks
- Keep the accounts and records for six years after the end of the period they relate to, even if you take them over from someone else
Payment of interest
If the interest on a deposit of over £500 is more than £10, you must pay it to the client.
Our reviews check that interest is being calculated and paid correctly, and that your client account terms allow you to do it.
Other rules agents need to follow
Client money is only part of the picture. These rules also apply to most agents in England, and we take them into account when we review your processes.
Redress scheme membership
Letting agents and property managers must belong to a government-approved redress scheme, and can be fined for failing to join one.
Tenancy deposit protection
Deposits on assured shorthold tenancies must be protected in an approved scheme, with the prescribed information given to the tenant within 30 days.
Tenant Fees Act 2019
Most fees charged to tenants are banned, and tenancy deposits are capped at five weeks’ rent where the annual rent is under £50,000.
Anti-money laundering
Estate agents, and letting agents handling monthly rents of €10,000 or more, must register with HMRC for anti-money laundering supervision.
Service charges
Service charge funds held for leaseholders are trust money and need their own accounting and year-end statements.
Record keeping
Accurate client ledgers and regular reconciliations are the evidence that every client’s money is safe.
What we offer
We can advise you on how to set up systems, processes and procedures to streamline your business operations, whatever your size.
Health check
A review of your client accounts, ledgers and reconciliations against the rules that apply to you.
Systems and processes
Practical controls, separate accounts and procedures your team can follow every day.
Auditor’s report
Examination of your estate agency client accounts and the report you need within six months of your year end.
Ongoing support
Bookkeeping, reconciliations and service charge accounts, so you stay compliant all year.
Tell us how many branches, landlords and client accounts you have, and we will send you a written proposal and fixed fee.
Request for Proposal ›Keep your clients’ money safe
Whether you need a one-off health check or a regular reporting partner, we will make sure your client money handling stands up to scrutiny. Call us on 0333 880 8400.
Related services and insights
This page gives general information about rules in England unless stated, not legal advice. Please take advice on your own circumstances.
