Letting agents have until 1 April 2021 to open segregated client accounts or they could face being expelled by their client money protection scheme, according to Client Money Protect (CMP).
Having a segregated client account has always been a requirement of the client money protection regulations, but agents were given two 12-month grace periods to comply, as many were experiencing issues opening pooled client accounts with UK banks and building societies.
The grace period comes to an end on 1 April 2021 and agents must comply by the deadline or they could be expelled by their scheme.
Previously, agents reported issues such as being informed by their bank that they would need to open separate accounts for each landlord rather than a pooled client account, which CMP said would be totally impractical as many agents manage hundreds of landlords’ properties.
Others claimed they were rejected as the lettings sector was considered too high risk. Despite the extension to resolve these issues, some agents are still experiencing problems opening pooled client accounts, explains Kate Mutter-Bowen, head of client money at Client Money Protect.
Mutter-Bowen said: “Some banks and building societies are asking agents for proof that they are a member of a client money protection scheme before they can open pooled client accounts. The problem is agents must have a client account before they can become a member of a client money protection scheme. This stalemate could lead to agents being expelled from their scheme.”
In some cases, agents have had existing client accounts closed by their bank and have been unable to open new client accounts.
There has been reports in the media that the National Trading Standards Estate and Letting Agency Team (NTSELAT) is cracking down on agents without client money protection. CMP says it is concerned that agents who are genuinely trying to comply may get fined because of this.
Mutter-Bowen added: “We have been working with banks and building societies to come up with a solution to this. There are two things agents can do. Firstly, write to your bank explaining the situation, we have a template letter on our website members of any scheme can use.”
“Secondly, some banks and building societies are willing to open client accounts that are immediately frozen, but can be used to satisfy the requirement for client money protection. This means we can complete the membership and the bank can then unfreeze the account.”
