A property expert is still trying to track down £1.4billion of money belonging to renters – in what he thinks could be “the next big financial scandal”
Anti-deposit campaigner Ajay Jagota of sales and lettings firm KIS and insurance backed deposit-free renting solution Dlighted is trying to locate the money, which is being held by landlords and letting agents through government-licensed Tenancy Deposit Insurance Schemes.
The Tenancy Deposit Scheme – the largest of the three schemes – has admitted that £1.4billion of tenant’s money is held this way, but has refused to reveal where it is and which corporations are holding this money.
MyDeposits and the Deposit Protection Scheme have also refused to disclose the information.
A Freedom of Information request for the information has now been accepted by the Department of Communities and Local Government.
KIS were the first letting agents to abolish monetary deposits, replacing them with a one-of-a-kind insurance policy. He is also founder of Dlighted, an insurance backed deposit-free renting solution offering up to £7,500 of cover for agents.
Ajay said:
“Wherever it ends up, deposit money still belongs to tenants – the law is quite clear.
“With custodial schemes the interest being earned on that money is used to administer the schemes and ensure redress schemes are free to renters, agents and landlords.
Large Regional and National letting agents whom elect to use the insurance schemes allows them to deposit the money in their own “client” account. This in turn enables them to earn interest on very large sums of renter’s money despite them being merely custodian of the money during a tenancy. A regional letting agent managing 5,000 tenancies may be holding as much as £6,500,000 in deposits and earning interest on such sums may not only pose a legal issue but also a moral issue – should agents be profiteering from tenants’ deposits? In my opinion in a sector that has continually struggled with its image there is no such justification.
“Large corporations are clearly using this money to increase their revenues – and we have heard of some organisations who seem to be charging administration fees to landlords to administer deposits – literally charging their customers for their right to profit from them!
With some professional associations operating within the private rented sector having shares within the various Deposit schemes this also raises a concern over possible conflict of interest.
“We’re not talking about pennies, here. We’re talking about at least £1.4bn. After PPI, miss-sold packaged bank accounts, LIBOR, and even multi-million pound class actions currently being pursued against a High Street agent for apparently receiving commission from its subcontractors on work it asked them to carry out, we could be looking at the next big financial scandal”.
Landlords and agents are legally required to place tenancy deposits in one of three government-licensed Tenancy Deposit Schemes – within which money is either held by the schemes themselves in a Custodial Scheme or Insurance Scheme where the money is retained by the landlords and agents. Research suggests that as much as £3.2bn of deposits are held in these schemes.