An estimated £750m in dormant or unclaimed tenancy deposits could be sitting within the deposit protection system in England and Wales, according to new analysis.
The Letting Partnership has raised concerns that proposed reforms to tenancy deposit protection have so far focused largely on how agents and landlords should protect deposits in future.
It argues that policymakers have paid less attention to what happens when tenants fail to reclaim deposits after their tenancy ends.
Unlike some other financial systems, England and Wales have no formal dormancy framework covering these funds.
The Letting Partnership estimates that around £750m could currently remain dormant or unclaimed within the system.
It based the calculation on publicly available housing and tenancy deposit data. However, no official consolidated figures show the actual value of deposits left unclaimed after tenancies end.
The company stressed that its estimate does not suggest wrongdoing by letting agents or tenancy deposit schemes.
Instead, it believes the figures highlight a gap in the existing framework. Current legislation does not clearly define when a tenancy deposit becomes dormant or determine the eventual treatment of genuinely unclaimed money.
Scotland already operates a different system. Legislation allows eligible dormant tenancy deposits to support housing-related causes once specified safeguards and timeframes have been met.
The Letting Partnership wants policymakers to consider a similar framework as part of tenancy deposit reform in England and Wales.
It argues that clearer rules could provide greater certainty for letting agents, landlords, tenants and deposit protection providers.
The company also believes policymakers need better data on dormant deposits before making wider changes to the deposit protection system.
Chris Mason, COO of The Letting Partnership, commented: “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.”
