Security Deposit When Renting an Apartment: What is it?

Pravozhil.com > Rent > What is a deposit or security deposit when renting an apartment and why is it needed?

By renting out housing for temporary use, its owners are trying in every possible way to protect themselves from adverse consequences. That’s why it’s so important to know what a deposit is when renting an apartment.

After all, in addition to presenting requirements to potential residents and establishing rules of residence, it is worth consolidating the relationship on paper. Moreover, future residents need to be prepared to pay a security deposit (deposit) upon move-in. We will tell you later when and in what amount it is paid.

What is a deposit when renting an apartment, and why is it needed?

What is a security deposit when renting an apartment?

Despite the fact that all rented apartments and their owners are different, in practice there are certain rules for providing housing for rent. What does a deposit mean when renting an apartment? Upon moving in, residents are immediately charged for their accommodation for a month in advance.

Many people ask to pay the same amount as a security deposit. It is designed to compensate for possible expenses of the homeowner in case of damage to property by residents, failure by them to pay rent and utilities, or flooding of neighbors.

After all, there are many cases when residents move out without warning, leaving behind dirt, damaged things, and debts for utilities. Therefore, persons renting out real estate prefer to insure themselves in case of tenants’ dishonesty. In contracts, such payment is usually referred to as a security deposit or security deposit.

The legislation does not contain a specific rule providing for the payment of a deposit when renting housing. However, in fact, the payment of this amount ensures the fulfillment of the obligations existing when renting an apartment.

According to the Civil Code of the Russian Federation, when concluding a transaction, the parties have the right to independently choose the method of securing it. The Code provides for the possibility of one of the parties to a transaction making a security payment in favor of the other in the event of its violation, including in the future.

As a rule, in contracts, tenants undertake to ensure the safety of the home itself and the property located in it, pay for utilities, and pay rent. If they are not fulfilled, then such insurance, at least in part, will be able to reimburse the apartment owner for his costs.

Advantages and disadvantages of renting with a security deposit

The advantages of renting an apartment with a security deposit are beneficial, first of all, to the landlord, because:

you don’t have to worry about the safety of your property;
the risk of non-payment of utility bills by residents is prevented;
It is possible to stipulate in the contract a situation where the security deposit serves as payment for any obligations of the tenant.

For the tenant himself, paying a security deposit serves as a guarantee of comfortable living, but in the event of dishonesty of the owner and the absence of an inventory of the property, you can lose the deposit allegedly due to damage caused.

Since the current legislation does not define the concept of a “security deposit when renting an apartment,” disputes often arise about the legality of collecting a “security” deposit. Therefore, it is important to provide for a variety of possible situations in the contract.

Thus, a security deposit is often charged with the condition that it will be counted as payment for the last month of residence. In this case, the owner runs the risk of not being compensated for damage to property and the risk of facing non-payment of utility services.

Therefore, it is not advisable to include an insurance premium in the amount of rent, having a certain amount on hand after the tenants move out in case of utility arrears or property damage.

When concluding an apartment rental agreement, you must specify in it:

terms of payment of the security deposit;
method of receiving and transferring property;
tenant obligations;
procedure for compensation of damages;
deadlines for returning the security deposit at the end of the rental period or upon unilateral termination of the contract.

If the procedure for making and returning the security deposit is not specified in the contract, then if a controversial situation arises, it will be quite difficult for either party to prove that they are right.

Since the rental process is a risky business, those who are looking to make money on their own apartment are wise to use certain types of protection against potential damage or fraud.

MORE DETAILS: Complete an apartment deal

A deposit when renting an apartment is one of the tools to compensate for possible material risks associated with real estate. We are talking about damage to property and the condition of the housing itself. In addition, in the event of sudden insolvency of the tenants, the security deposit will allow the landlord to avoid financial losses.

In most cases, the deposit when renting an apartment is equal to the amount of payment for accommodation for a month. But exceptions are possible. For example, tenants may be required to pay for several months (3-4) at once. If we consider the situation with luxury real estate that is rented out, then it makes sense to expect a requirement to pay the annual cost.

Some agencies take a slightly different approach to such a tool for compensating possible damages. We are talking about a scheme in which such a deposit is not considered as a security deposit or an advance payment for the last month of rent.

This money cannot be used to pay rent; its only purpose is to guarantee the financial security of the apartment owner in the event of damage to his property by tenants. Therefore, when understanding what a deposit is when renting an apartment, it is worth taking into account this approach to the rental process.

Refund of a deposit

The peculiarity of using the insurance amount when renting an apartment becomes clear at the end of the lease. When the last month of living in the apartment has been paid for, the owner takes over the real estate from the tenant, which means inspecting the condition of the housing and property in particular.

If any damage was discovered (furniture was damaged or repair questions arose), then a security deposit, which is kept by the apartment owner, is used to compensate for it. The remaining funds after payment of the damage are returned to the tenant. If there are no complaints, the owner gives the entire amount to the tenant.

If an agreement was used during the rental process, then there should be no problems with returning the deposit. Thus, in this situation, the deposit when renting an apartment can be considered as a security payment.

Initially, it is worth noting that the current legislation of the Russian Federation does not provide grounds for clearly defining the conditions for the return of the security deposit. For this reason, based on Article 329 of the Civil Code, both parties will have to independently determine what obligations the payment of the deposit will imply.

But if we apply the most common scheme that is used in contracts, then attention should be focused on the following points:

payment of rent that does not meet the established deadlines;
damage caused to property located in the apartment;
unilateral termination of the lease agreement without warning and before the end of the agreed period;
lack of payment for rent, telephone calls and utilities.

It is very important to make sure that the rental agreement for an apartment with a security deposit contains all the reasons why a security deposit may be withheld. It would be a good idea for the tenant to check the conditions for returning the security deposit.

It is advisable for each party to ensure that all their interests are respected. For example, if the apartment owner insists on stipulating the tenant's liability for early termination of the contract, the tenant, for his part, can demand the same from the property owner.

The issue of issuing a security payment must be resolved competently. Therefore, upon receipt of funds corresponding to the amount of the security deposit according to the agreement, the apartment owner must write a receipt stating that the money was transferred. This will save both the tenant and the homeowner from possible unpleasant nuances associated with paying the deposit.

The receipt itself must include the following information:

landlord's passport details;
the amount of the accepted payment;
date of transaction confirmation.

At the same time, considering what a deposit is when renting an apartment and what are the features of its registration, it is important to note the following fact: in some cases, the amount of the security payment may be divided into several months. If there was such an installment plan, then the party accepting the money needs to write a receipt for each paid part of the deposit.

Compliance with this format for concluding a transaction is important, since otherwise it will be difficult to prove anything in court.

It is important not only to know what a deposit is when renting an apartment, but also to be able to competently protect yourself from possible reasons for its non-refund. We are talking about claims from the owner of the apartment regarding damage to property. In order to avoid accusations that are not true, it is worth taking photographs of the state of repairs, equipment and furniture at the time of entry.

After photographs are taken and attached to the contract, they must be certified by signature from both parties. Thus, the main reason for a problem-free rental can be identified as the exclusion of potential controversial issues at the very beginning and at the contract level.

By the way, some owners of residential real estate cannot decide whether to include the amount of the security deposit in the income statement or not. According to many lawyers, this is not worth doing, since these funds are not payment for rent and are not used as income.

Possible difficulties

One common mistake on the part of the landlord is the intention to use the security deposit under the lease agreement as payment for the last month of the tenant's occupancy.

The risk in this situation is quite obvious: if a few days before the transfer of the apartment property is damaged or large telephone bills are discovered, the owner will not be able to compensate for the losses incurred.

Another point to consider is the normal wear and tear of property and renovations. Sometimes tenants are blamed for such changes, resulting in tense conflicts. But if you pay attention to the civil code, you will notice that the apartment owner has no right to demand financial compensation for natural wear and tear.

An example is the loss of color saturation of curtains (fading in the sun), which the renter had no influence on. But if, say, the curtains were damaged by the tenant's active pet, then in this case the claims against him will be fair.

This question is also relevant, since both parties may not have the same opinion regarding the cost of the damage caused. A striking example of such a situation is a refrigerator breakdown.

The owner of the apartment may require that this type of household appliance be completely replaced. The tenant, not agreeing with such a solution to the problem, is able to offer compensation for the cost of repairs.

Obviously, the difference in costs will be significant.

Therefore, it is advisable to indicate such points in the contract from the beginning.

Having figured out what a deposit is when renting an apartment, the owner should take into account the following principle: the amount of the security deposit should be returned only after receiving all bills, including telephone bills. Then it will be possible to objectively assess the presence of any losses.

If you neglect this rule, you may find yourself having to pay for long long-distance calls from former tenants.

Conclusion

A security deposit is used when renting real estate in virtually all civilized countries. This scheme has proven its practicality more than once. Therefore, it should not be neglected.

When renting an apartment or house, the owner may impose a condition on the payment of a security deposit.

Why is this necessary, how legal is this requirement, how to make the final settlement with the landlord?

READ MORE: Tax on the sale of a share in an apartment for more than 3 years Advisor

What it is?

Most often, housing is offered to tenants with full furnishings - furniture, refrigerator, washing machine, TV, etc.

This service is very convenient for residents, especially if they are young people who have not had time to acquire property.

Are there any risks for the homeowner?

There are a lot of them, and here are the main risks:

Damage or loss of things;
Damage to expensive apartment repairs or plumbing;
Neighbors Bay;
Disappearance of tenants without making a full settlement with the owner;
Accumulation of unpaid utility bills, etc.

A security deposit is a certain amount that is paid by the tenants to the owner, as insurance, in case of unforeseen circumstances associated with the tenants, to cover material losses caused by careless tenants.

Deposit concept

Types of collateral

What types of security deposit are there?

The amount that apartment owners ask from tenants upon moving in is called differently. It is specified in the contract as a pledge, a security deposit, or a security deposit. However, in essence, they are the same thing.

These payments are designed to insure the owner of an apartment or house in case of damage to his property by tenants or other violation of the contract.

Sometimes a deposit is confused with a commission, which has a completely different nature. If renting a home is carried out through a real estate office, then they charge a certain fee for their services. It is called a commission.

Accordingly, a commission is paid to the realtor for the work he has done in selecting housing.

And deposit payments are made to the tenants (landlords) themselves in case of violation of the terms of the concluded agreement in the future. It may specify what exactly the deposit is taken for, for example, in case of damage to property and the apartment itself or failure to pay payments due under the contract.

However, the agreement may also contain general wording about providing this amount for possible losses of the property owner in case of violations committed by the residents.

What is a deposit when renting an apartment?

The deposit is needed to protect the rental property from any negative phenomena, such as damage to property, arrears of payment, etc. It is a kind of guarantee that all conditions stipulated in the contract will be fulfilled. This deposit has different names: security deposit, guarantee payment, last month's payment, security deposit.

We recommend reading: Representative on oral petition

When the contract expires, it is terminated. The owner of the home checks the condition of the property and debts for payment. If everything is in order, the deposit is returned to the person who rented the property. But, if there are any breakdowns or debts for housing, electricity or telephone, the apartment owner deducts this amount from the deposit.

Bail amount

Strictly speaking, there are no rules limiting the amount of security deposit paid to the landlord.
Therefore, he is free to indicate any amount that, in his opinion, may be sufficient to compensate for possible losses.

Of course, this amount should not be exorbitant. In current practice, apartment owners usually ask for a deposit in the amount of a month's rent.

Sometimes this amount can increase to two months' payment. The main thing is that its size is determined not in words, but in a written agreement. After all, unscrupulous landlords can change their minds. And residents who need an apartment urgently have to agree to new conditions that are not very favorable for themselves.

Therefore, it is in the interests of both parties to conclude an agreement that will reflect all the essential aspects of their relationship. In particular, you need to specify the amount of such deposit, the procedure for its payment and return.

What is the commission when renting an apartment?

Unreliable tenants who will not pay rent and will move to an unknown location;
From property damage. If anything in the apartment is damaged, the landlord will be able to recover material damages;
The agreement gives the right to contact the police if necessary . It is useless to go to the police without an officially formalized agreement; the application will not be accepted anyway.

In addition, the client saves his time on searching for an apartment to rent. In this case, not only the tenant benefits, but also the owner of the apartment, since he will not need to look for a solvent and decent tenant, the realtor will do everything for him.

How to protect yourself from scammers?

When concluding housing rental transactions, certain risks are borne by both parties. Apartment owners often have to deal with unscrupulous, unscrupulous tenants.
They can damage the landlord's property, disturb neighbors, litter in the entrance, not pay rent and utilities, and let other tenants in.

Having received the keys to the apartment, some rent it out as owners to other people for a lot of money and disappear. And the property owner then has to resolve issues of eviction. On the other hand, tenants can also fall for unscrupulous landlords.

Expert opinion

Valiullova Antonina

Expert of the site pravozhil.com

Ask a Question

If you are still not confident in your own abilities in searching for rental housing, we advise you to seek help from professionals. A competent specialist, for a small fee, will help you find premises, and will also check the relevant lease agreement before signing with the owner or an authorized person.

In order to find a responsible and honest realtor, just search the Internet or ask friends and acquaintances for information. We advise potential tenants to take care of their planned rental property in advance and anticipate any negative consequences.

There are many fraudulent schemes in the rental housing industry. Sometimes living space is rented out by persons who are not at all the legal owners of the property.

Commission to a realtor when renting and renting out an apartment - what is it and who pays it

The amount of the commission may also depend on the type of transaction being made. The selection of housing can be carried out by one agency or together with a partner. If two agencies work for you at once, then you need to pay them 100% of the monthly rent . They will divide this amount among themselves.

The price includes the selection of a worthy tenant to live in and the preparation of all documents related to this process. The average amount (it is a one-time payment) ranges from fifty to one hundred percent of the cost of rent for one calendar month.

Interesting read: Employment contract with individual entrepreneur sample 2020

Commission for renting and renting an apartment

The amount of the fee may vary significantly depending on the specifics of the service. Today there are several types of commission. A realtor can collect money from a client, both when renting out an apartment and when helping to rent a property. The commission must be calculated in accordance with established rules. The parties involved in the manipulation are obliged to strictly comply with them. A violation may give rise to subsequent proceedings. We will talk further about what documents will be needed to draw up the contract, the specifics of providing the payment and its possible amount.

According to the rules, the agency's commission for renting an apartment should be provided only if there is a drawn up agreement. The document will help protect against the fact that the owner turns out to be a fake. If the commission is paid, but the owner of the apartment decides to terminate the contract, or it turns out that he is not the owner of the property, it will not be possible to get the money back. However, the contract still protects the client. If the agreement specifies a specific amount and it was signed by a realtor, in the event of force majeure, the citizen may demand the return of commission funds. If the company refuses to pay the tenant, he can go to court.