Letting agents have only 10 days to open segregated client accounts or they could face being expelled by their client money protection scheme.
That’s the view of industry supplier Client Money Protect.
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 final grace period comes to an end on April 1 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 would be 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 of Client Money Protect: “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.”
She says in some cases, agents have had existing client accounts closed by their bank and have been unable to open new client accounts.
This is what Symon Payne from Aireside Home Partnership experienced: “We have been in the property lettings and management business for over 30 years and have always had a separate client account. One for residential rents and one for deposits, repair funds and commercial rents.
“We have been banking with TSB since 2014, however last October, out of the blue, we received a letter from them advising us that they were closing our client accounts, as they were no longer offering that type of account.
“We rang other banks that we had previously dealt with, including Lloyds, HSBC, NatWest and Yorkshire, but all responded with words to the effect of ’we are not opening any types of client accounts at the moment’.
“After months of phone calls going back and forth with several banks, we’ve finally been able to open an account with Metro Bank. We pick up all the account details and cards next week. It has been a long and stressful journey.”
CMP says it is concerned that agents who are genuinely trying to comply may get fined by Trading Standards.
Mutter-Bowen says agents have two courses of action.
“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.”
This post has originally been featured in Letting Agent Today.