The regulations will take effect from 1 April, with the threat of fines of up to £30,000 if agents fail to comply.
The government highlighted that around £2.7bn in client funds – such as deposits from tenants and landlords’ rental payments – was held by letting agents in 2017.
However, there are many occasions when people are unable to reclaim the money that is rightfully theirs, whether due to misuse by the agent or bankruptcy.
Up to now membership of a client money protection scheme has been voluntary, with the government estimating only around 60 per cent of agents have signed up.
Five separate schemes have been approved. All agents will have to register with one before the start of April.
Heather Wheeler MP (pictured), minister for housing and homelessness, said that for tenants and landlords to be at the risk of losing out financially simply because their agent had failed to sign up to a scheme to protect that money was unacceptable.
She continued: “While the vast majority of agents act responsibly, this new law will prevent people from losing their hard-earned cash through no fault of their own. This will give tenants and landlords confidence and peace of mind that their money is in safe hands while with their agent.”
The government confirmed that separately a working group is looking at a potential new regulatory framework for property agents, which would include a code of practice and an independent regulator, alongside the introduction of mandatory professional qualifications.