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UK tenants' £5bn deposit mountain losing out on potential £95m in interest

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UK tenants' £5bn deposit mountain losing out on potential £95m in interest


Published by Anonymous for in Housing and also in Finance, Regulation

UK tenants' 5bn deposit mountain losing out on potential 95m in interest UK tenants' 5bn deposit mountain losing out on potential 95m in interest

Image: Money via Shutterstock

The UK's residential tenants are missing out on up to £95 million in interest on the collective £5 billion in deposits held by the country's landlords, campaign group Generation Rent (GR) has claimed.

And GR says that tenants can earn interest on the cash: by turning their deposits into a new type of savings account.

As part of a consultation it is currently running, GR has also highlighted the following issues with the deposit system that it believes need urgent reform:

• Some deposit disputes can take months to resolve so GR is calling for more tenant-friendly arbitration processes.
• With many landlords still keeping tenants’ deposits in their bank accounts, which "enables the unscrupulous to misuse the funds", GR is calling on deposit protection schemes to close these loopholes.
• With tenants struggling to raise the money needed to rent a home, GR is proposing a bond scheme which will reduce the initial cost.

GR's calls follow the emergence of another scandal around a criminal letting agent that fraudulently used renters’ money that was ‘protected’ under an insurance-based scheme.

Agency Masella Coupe took £304,000 of tenants’ deposits from an account protected by insurance-based scheme MyDeposits, using the money for other purposes when they needed it over a two-year period (2009-2011).

Although the account was subject to audits from MyDeposits, the agents were able to cover themselves by depositing cheques they knew would not be honoured.

This allowed the bank account to briefly show the required figures required to pass the MyDeposits audits, after which the cheques eventually bounced.

Though the agents have since been prosecuted – and MyDeposits’ auditing eventually brought the fraud to light - GR says the case shows the "inherent problem" with protection schemes that allow letting agencies to hold deposits as though it were their own money, leaving the cash "exposed to unscrupulous individuals and organisations".

GR is inviting renters, landlords, housing groups and those interested in improving policy in this area for comments about the ideas outlined in the consultation and any other suggestions, before putting final proposals to the government.

Alex Hilton, GR director, said: “Tenancy deposit protection has helped renters but schemes and landlords still fail to treat deposits as the tenants’ money. We’re talking significant sums of money which are difficult for renters to come by, so getting it back at the end of a tenancy must be reliable and quick, to stop devastating spirals of debt.

“The cavalier attitude to tenants’ money is why we see rogue landlords and agents using it to fund their cashflow. It is good to see that the Masella Coupe case resulted in a conviction, but the agents escaped jail and there is nothing stopping them setting up another agency.”


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