Landlords were already under pressure from tax changes and increasingly stringent private rented sector regulations before COVID-19 hit the headlines. But the impact of the pandemic on tenants’ ability to pay the rent and landlords’ ability to pay the mortgage, has given rise to much greater financial uncertainty for many landlords and tenants.
The NRLA’s latest confidence index unsurprisingly reveals landlord confidence to be very low. The 2020 Q3 survey also highlights that on rents, the shift in landlord response has been particularly dramatic, with a substantial increase in the proportion of landlords who plan to either hold rents or reduce them over the next twelve months. Landlords say they are prepared to take a drop in rental income because of concerns about the future direction of the economy and property market conditions, according to the survey.
Landlords’ concerns about the economy and the property market generally, combined with an increased risk of cash flow problems, are likely to make them more diligent when selecting letting agents to manage their rental properties. We already know from a recent industry poll carried out by Client Money Protect’s parent company, Hamilton Fraser, that nearly 60 per cent of landlords say they are less likely to use an agent during the next 12 months, as a result of the pandemic.
Given the precarious financial situation so many landlords and tenants find themselves in right now, for those landlords who do opt to use a letting agent having the confidence that their money is protected is vital. This means that for letting agents, having client money protection in place offers much needed reassurance to landlords and tenants at a time when they most need it.
Protecting client money is more important than ever during these unprecedented times. While you may genuinely believe you don’t need to protect client money, if you don’t belong to a client money protection scheme you represent a greater risk to landlords and tenants.
What’s more, client money protection is no longer optional - all agents who handle client money in England have been required to belong to an approved client money protection scheme since it became mandatory in April 2019. This means that if you don’t have client money protection in place, you are breaking the law and risk a fine of up to £30,000.
Kate Mutter Bowen, Associate Director at Hamilton Fraser, parent company to Client Money Protect, says: “The coronavirus pandemic has added to the significant financial burden many landlords were already facing due to legislative and taxation changes. As landlords get to grips with how to maintain their tenancies, remain compliant and support their tenants during these challenging times, it is vital that they can trust their agent with their money. The current situation is an opportunity for agents to differentiate themselves, to go above and beyond basic compliance. At the very least, agents must make sure they are protecting client monies in a government approved scheme such as Client Money Protect.”
In his recent blog post, Are you the Perfect Partner? Sean Hooker, Head of redress at the Property Redress Scheme, suggests four measures that agents should implement to make sure they offer security and reassurance to their clients. Sean emphasises the importance of agents protecting their landlords’ and tenants’ money with client money protection insurance. He adds:
“Whilst every agent should have all these measures in place by now, make sure you highlight them to landlords to give them reassurance, but also to help make them aware that some agents may be taking a chance in not having them in place and maybe that is why their prices are so low.”
Don’t forget, you must also display your certificate of membership in your business premises and on your website - failure to do so can result in fines of up to £5,000.