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As the Government considers reforms to England's tenancy deposit system, we think one major question is being left out of the conversation: what happens to deposits that are never reclaimed?
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Discussion so far has focused on how deposits should be protected in future, custodial versus insured schemes. Far less attention has gone to deposits that remain unclaimed once a tenancy ends. Unlike many mature financial systems, England and Wales currently has no formal dormancy framework governing these funds, and that gap sits at the centre of our analysis.
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A Gap Nobody Is Measuring
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We estimate that around £750 million could currently sit within the tenancy deposit system in England and Wales as dormant or otherwise unclaimed balances. We modelled this figure using publicly available housing and tenancy deposit data, because no official or consolidated record currently exists showing the true value of deposits left unreturned after tenancies end.
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To be clear, this estimate is not a suggestion that any deposit scheme or letting agent has acted improperly. What it points to is a policy gap: there is no legislative framework defining when a deposit becomes dormant, and no clear process for how genuinely unclaimed funds should ultimately be treated.
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Scotland Has Already Answered This
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Scotland has already addressed this. It has legislated for dormant tenancy deposits, with a process that allows eligible unclaimed funds to be directed towards housing-related causes once appropriate safeguards and timeframes are met.
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We believe the ongoing reform process is the right moment to ask whether England and Wales should introduce something similar. Doing so would bring more transparency to how long-term unclaimed balances are treated, and more certainty for tenants, agents, landlords and deposit protection providers alike.
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Right now, without an official figure, policymakers and the industry are debating the future shape of deposit protection without fully understanding the scale of dormant funds already sitting inside the current system. Our analysis is an attempt to put a number on that gap and start the conversation.
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"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."
Chris Mason · COO, The Letting Partnership
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