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 will protect the rental money that a tenant pays to a letting agent to pass onto their landlord in situations such as the agent ceasing trading.

Details of the policy provided by the Government reveal that the level of insurance held by CMP schemes will not cover the full value of the rental money held by the letting agent and that these schemes will not pay out in certain circumstances. Also, even if these schemes do pay out, they will be able to cap the amount they pay out, in the same way as the Financial Services Compensation scheme.

The Residential Landlords Association is warning that there will be a considerable risk to landlords, particularly those with large portfolios, of not receiving all the money which they are owed. It is advising that to help reduce the risk, landlords should spread their properties across a number of agents so that they reduce the need to go over whatever limit will be guaranteed with each one.