Surprising new figures that show about £750 million could be sitting in the tenancy deposit system as dormant or otherwise unclaimed in England and Wales have led to calls that it should be used for housing-related causes.

The Letting Partnership used TDS scheme data on insured and custodial deposits, alongside English Housing Survey data on private renting households and the proportion of tenancies where a deposit is paid, to come up with the figure – although this has been challenged by others in the sector.

It estimates the gap to be the equivalent of about 13% of reported deposits, based on the difference between the total number of deposits reported and the total number of deposits it would expect to see.

It says the absence of any official figure means policymakers and the industry are currently debating the future structure of tenancy deposit protection without fully understanding the scale of dormant funds already sitting within the system. The firm says there’s no clear legislative framework defining when a tenancy deposit becomes dormant or determining how genuinely unclaimed funds should ultimately be treated.

Scotland

Unlike England and Wales, in Scotland a deposit becomes unclaimed where no application for repayment is made within five years. The permitted uses include advice and assistance for private tenants, services supporting their interests, and preventing private tenants becoming homeless.

Chris Mason, COO of The Letting Partnership, says its 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 is. He adds: “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.”

Custodial

mydeposits’ CEO Eddie Hooker (pictured right) says schemes themselves estimate that no more than £20-£25 million of deposits in custodial models remain unclaimed, but they are ring fenced in case of future claim. “Schemes report unclaimed deposit volumes to MHCLG on a periodic basis,” Hooker tells LandlordZONE. “The main reason for unclaimed deposits is overseas tenants, especially students, who change email, bank details and contact details when they leave the UK.

“Insured backed schemes allow the landlord and agent to hold the deposit and the deposit remains protected by the scheme until advised otherwise. Schemes have no way of knowing whether deposits are returned or continue to be held by landlords and agents other than continuing to charge for the protection until unprotected by the landlord or agent.

“However, with the now expected closure of insured backed schemes over the next few years, it’s likely that many more tenants will be reunited with their deposits going forward.”

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