Around £750 million could be sitting within the tenancy deposit system as dormant or unclaimed funds, according to analysis from The Letting Partnership.
The estimate covers England and Wales and comes as the Government considers reforms to the way tenancy deposits are protected.
There is currently no official consolidated figure showing how much money remains unclaimed after tenancies have ended, with The Letting Partnership modelling its £750 million estimate using publicly available housing and deposit data.
The business says the figure should therefore be treated as an estimate rather than suggesting deposit protection schemes or letting agents are improperly retaining tenants’ money.
DORMANT DEPOSIT GAP
The Letting Partnership argues the bigger issue is the absence of a formal framework defining when a tenancy deposit should be considered dormant and what should ultimately happen to money that cannot be returned to its owner.
It believes this has been overlooked as policymakers consider the future structure of deposit protection, including the respective roles of custodial and insured schemes.
Scotland has already introduced a statutory approach to unclaimed tenancy deposits, allowing eligible funds to be transferred for housing-related purposes once prescribed safeguards and time periods have been met.
The Letting Partnership wants the current reform process to consider whether a similar framework should operate in England and Wales.
LACK OF DATA
Chris Mason (main picture, inset), Chief Operating Officer of The Letting Partnership, says: “The tenancy deposit reform debate has understandably focused on how deposits should be protected in the future, but there is a wider governance question that also deserves attention.
“At present, there is no legislative framework in England and Wales governing dormant tenancy deposits, nor is there any official reporting mechanism that reconciles deposits held within the protection schemes against those that remain active within letting agents’ portfolios. That means there is no clear picture of how many deposits may simply be sitting within the system after tenancies have ended.
“Our modelling suggests the figure could be significant, potentially running into the hundreds of millions of pounds, but without that reconciliation mechanism in place, nobody can say with confidence what the true scale actually is.
“Our analysis is an attempt to start that conversation. Before deciding how the system should operate in the future, it’s important to understand the one we already have and whether there is an opportunity to bring greater transparency to balances that may otherwise go unnoticed.”
