Hundreds of thousands of pounds worth of unclaimed tenants’ deposits could be handed over to the Crown.
The situation has arisen in Scotland, where the only authorised schemes all physically bank the money and where insurance-backed schemes are not allowed.
Within three years of tenancy deposit regulations coming into force in Scotland, the schemes are holding on to £400,000 in unclaimed money, with the pot continuing to grow.
By 2018, it is predicted that it will top £1m. However, the Scottish situation does not appear to be rising south of the border.
SafeDeposits Scotland – a sister company to the Tenancy Deposit Scheme – says it has been told that after six years, the money will be claimed by the Crown.
The scheme is calling for a change in the law, and says the money would be better utilised improving the private rented sector.
Jennifer Paice, chief executive, said that no provision had been made to deal with unclaimed deposits, as no one had expected the situation to arise.
As a not-for-profit organisation, SafeDeposits Scotland cannot keep the unclaimed money.
Gordon Maloney, president of the National Union of Students in Scotland, told the Glasgow Herald: “It is really worrying that such a significant amount of deposits are going unclaimed, a sign that tenants either do not know their rights or are not able to exercise them.
“When tenants continue to see rents increasing by scandalous amounts, and the Scottish private rented sector is in need of investment and reform, not least regulating the cost to tenants, the last place unclaimed deposits should be going is into the UK government’s bank account.”
Paice told Eye that her scheme is “constantly working to reach a vast number of missing tenants who are yet to claim deposits they are due”.
She added: “Under the current rules, deposits can be held for six years after which they may be treated as ownerless and fall to be consigned to the Queen’s and Lord Treasurer’s Remembrancer.
“Clearly we would prefer this money to go back to the rightful owners, but if that’s not possible then we need a change to the rules which would allow the funds to be used for the benefit of the private rented sector in Scotland.”
Eye asked custodial scheme DPS whether a similar situation exists south of the border.
Last night, Julian Foster, managing director of the DPS, said: “Unlike in Scotland, in England and Wales there is no deadline by which deposits must be claimed before they are transferred to the government.
“As a result, the DPS looks after the funds indefinitely, ready to respond to any claim.
“We also run publicity campaigns to remind people to participate in the Joint Deposit Repayment process and to get in touch if they think their deposit is still with us.
“However, the actual value of unclaimed deposits remains very low. Our systems ensure that it is very rare that money is not claimed. At the last count, the DPS held over £1bn in deposits, but less than 0.2% had been unclaimed for more than two years.”