The TPO, The Property Ombudsman, is advising any landlords that are going to use a letting agent to manage their property, to choose those that offer CMP (Client Money Protection) Insurance, rather than opting for those that offer cheaper fees.

This advice coincides with the regulation that by October 1st, this year,all letting agents must be signed up to a redress scheme and is almost a year on from when trade bodies and insurance brokers made the CMP cover available to agents.

There have been a few widely covered stories of letting agents becoming bankrupt and leaving debts to landlords of many thousands of pounds from outstanding rent. The TPO claims this would not have happened  if the agents had been insured to protect the money. 

It is imperative that agents should "ring fence" their landlord's rent and tenant deposits in a different client account, away from their own business account.

A minor percentage of letting agents that may be acting illegally, will at times use the landlord's rent as day to day capital, rather than properly protecting it.  

From August 1st of this year a new Code of Practice has been introduced for letting agents, at the same time as a new one for estate agents. This shows that with new legislative changes and industry practice, how the sector is becoming more proficient in protecting tenants, landlords and letting agents.  

Gerry Fitzjohn, Chief Operating Officer of TPO said:
“As the UK’s largest property redress scheme, it’s truly upsetting to hear of cases where landlords have lost thousands of pounds in rent paid to an agent that has been used unlawfully and cannot be recovered because the agent did not have CMP cover in place.

“Rather than choose to use an agent that charges the lowest fee, landlords must ask if the agent has a CMP policy in place to protect their rental income.

“Within the industry, thousands of agents are already CMP protected but there are still a number of firms that are unaware of the scale of protection it offers. A TPO survey even revealed that some agents wrongly thought CMP duplicated the deposit protection schemes when that simply isn’t the case.

“With more people renting now than ever before, landlords and agents need to understand that CMP provides the guaranteed assurance that the rent collected by CMP protected agents is covered against fraud and unlawful use."

The TPO reports that annual rent paid is in the region of £23 billion and out of this between £6 to £10 billion is collected by letting agents. The TPO claims that nearly 80% of their registered agents have taken out CMP cover and this is why they are advising landlords to request this.

Susie Crolla, CEO of the Guild of Letting & Management, agrees fully with TPO and says:

“I feel it is important that we demonstrate best practice in everything that we do; even when there is as yet no legal requirement for us to do so. From 1 October 2014, therefore, being registered with TPO and having CMP cover will become a mandatory condition of membership for The Guild Subscription.

“While many members of The Guild are already registered and covered, this decision is an important step akin to an ‘outward sign of inward grace’. It sends a message to our stakeholders that we are serious about adopting the highest standards of professionalism and integrity as an organisation that is progressive and can be trusted.”