An estimated £750 million in unclaimed tenancy deposits may be sitting dormant within England and Wales’ deposit protection system, according to analysis by agency software provider The Letting Partnership.
The figure has emerged as the government reviews the tenancy deposit protection framework, with Housing Minister Matthew Pennycook confirming earlier this year that ministers are considering removing insured tenancy deposit schemes as part of broader reforms.
Chris Mason, Chief Operating Officer at The Letting Partnership, said the absence of legislation governing dormant deposits represents a significant oversight in current regulatory discussions. Unlike England and Wales, Scotland has already established a legal process for handling unclaimed deposits, directing eligible funds towards housing-related initiatives after specified timeframes.
No reconciliation mechanism
Mason noted that England and Wales currently lack both a legislative framework for dormant deposits and an official reporting mechanism to reconcile deposits held within protection schemes against active letting agent portfolios.
“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,” Mason said.
“That means there is no clear picture of how many deposits may simply be sitting within the system after tenancies have ended.”
The £750 million estimate represents deposits that may have remained in the system after tenancies ended, though Mason acknowledged that without proper reconciliation mechanisms, the true scale remains uncertain.
Calls for transparency
The analysis comes as the rental sector faces increasing scrutiny over regulatory frameworks. Communication gaps in property transactions have already been identified as contributing to delays across the sector, with average completion times extending significantly.
Mason suggested that ongoing deposit reform presents an opportunity to introduce similar transparency measures to those implemented in Scotland, which would provide greater certainty for tenants, agents, landlords, and deposit protection providers.
“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,” he said.
The government’s wider review of tenancy deposit protection follows ongoing debates about housing policy frameworks across different UK nations, with Scotland’s approach to dormant deposits potentially serving as a model for England and Wales.
The Letting Partnership’s analysis aims to initiate discussion on dormant deposits as part of the broader reform conversation, though official government figures on unclaimed balances have not been published.
