Around £1.2bn worth of deposits are not protected in tenancy deposit schemes, analysis from Hamilton Fraser’s deposit replacement provider Ome has found.
The Center for Economics and Business Research (CEBR) estimates that 14.5% of all deposits held are not protected by landlords or agents, while around 1.1 million tenancy deposits are unprotected.
Landlords who fail to protect an assured shorthold tenancy deposit lose their right to evict and face court claims for compensation.
Given that the average new deposit is currently at £1,139, the penalty could be £4,556 per unprotected deposit.
Matthew Hooker, co-founder of Ome, said: “The reality is that the private rental sector is changing, and has been changing gradually through the formal introduction of deposit protection in 2006 and the subsequent launch of the more traditional protection schemes.
“It’s impossible to tell just how many deposits are still sat unprotected in the bank accounts of either rogue landlords or agents but based on market data we can make a conservative estimate that this total value runs into the hundreds of millions of pounds.
“We’d always advise tenants to check which deposit protection scheme your agent or landlord is part of and to make sure they give you the documentation confirming the deposit is protected.
“For landlords and agents that would rather not have to worry about the often arduous and risky process of managing a deposit, we’d recommend looking at products such as our own deposit replacement membership rather than hoping they don’t get caught. It removes the need to take cash deposits but keeps you protected should the worst happen.”
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