Understanding The Security Deposit In A Rent Agreement & Its Refund
Security Deposit In A Rent Agreement- Do you understand why a security deposit is required when renting a home? What is the clause governing security deposit refunds? Continue reading to understand the complexities of this challenging yet crucial Rent Agreement clause.
Families choose to rent homes rather than buy them for a variety of practical reasons, and the demand for rental housing in India is increasing yearly. For improved economic prospects, educational possibilities, and a generally higher quality of living, the migratory population of the nation keeps relocating between metro areas & tier I & tier II cities.
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You should understand the complexities of a security deposit for rent if you rent in India.
The security deposit is a common additional financial requirement for tenants. The cost varies widely depending on the rental market, with some unregulated markets requesting a deposit equal to a full year’s worth of rent.
Understanding your rights as a tenant and the purposes and processes for which a security deposit may be applied might help you establish your claims when asking your landlord to return the security deposit.
Rent Security Deposit – Meaning
As the name suggests, a security deposit is an additional sum that the landlord collects as a guarantee for addressing any unanticipated events that may emerge while the tenant is using the property.
It is often collected before the tenant moves in and kept on hand until the duration of the rental agreement.
Rent security deposit must be entirely repaid. Do not forget that even though a landlord is required to refund rent, if the tenant is proven responsible for damage to the rental property, the landlord may choose not to do so.
Why a security deposit is required for rent
Consider a renter who enters a property and pays INR 15,000 per month. The rental property is occupied by the tenant for a full year while the landlord, who lives in another city, is absent.
The landlord comes to the premises to look for obvious property damage at the conclusion of the renting period. The bathroom faucets are broken and damaged, and there are fractures in the tiles in the living room.
What now does the landlord do after discovering that the damage was brought on by the tenant?
The renter cannot be made to assume financial responsibility because they have already moved out.
The security deposit for the rental that was gathered will be useful in this situation. Depending on the degree of the damage, this money may be legally retained.
How much of a security deposit should be required for rent?
The security deposit for residential properties cannot be greater than 1-2 months’ worth of rent in the majority of Indian cities. The security deposit for rent for non-residential or commercial spaces might be a sum equal to 1-6 months’ worth of rent.
Before signing a Rental Agreement that requires a monthly payment of INR 20,000. The renter may be required to provide the landlord with a security deposit of INR 40,000.
However, this market operates in numerous locations with no regulatory oversight, giving landlords total discretion when establishing a security deposit.
What Is the Difference Between a Security Deposit & an Advance Rent?
No, security deposits for rent and advance rent are two entirely distinct things. Some landlords demand that rent be paid in full before the first of the month. You might have to make an initial payment equal to two months’ worth of rent when you first rent the space. This amounts to advance rent and will be credited towards the conclusion of the lease term; a return is not possible.
Here is a depiction.
A tenant moves into a new home with a 20,000 INR rent per month. He/she agrees to pay an advance payment that is equal to one month’s worth of rent and signs a rental agreement with a one-year term. As a result, the tenant sends INR 40,000 before the first month’s rental cycle begins. The advance payment will be adjusted, so the tenant does not need to pay the previous month’s rent. However, unless the tenant in any way destroyed the rented property during his or her stay. The landlord is required to return any security deposit.
When may a landlord refuse a security deposit refund?
Normally, at the end of the lease term, the security deposit for rent must be fully reimbursed.
However, the landlord retains the right to deduct either the entire security deposit or a portion of it to cover the costs of restoring the damages if the renter causes any harm to the property while residing there.
General wear & tear, progressive structural damage, and maintenance problems like drainage cleaning, exterior whitewashing, electrical rewiring, and damage to the structure brought on by a natural disaster cannot be taken care of with the security deposit.
All of them are the landlord’s responsibility and must be covered out of pocket.
Only particular renter-caused damages, such as stained walls, broken faucets or fixtures. Or other deliberate structural damage, may be cover by the security deposit.
Sample Format for Refund of Security Deposit in a Rental Agreement
It is wise to create a full Rental Agreement that specifically indicates the security deposit amount, specifies the rental and return terms. And provides a thorough explanation of when the security deposit may be used in order to ensure clarity. Here is an example rental agreement with a refund clause.
Conclusion of the Rent Agreement’s Security Deposit & Refund Clause
When looking for a home to rent, security deposits have suddenly become an inescapable expense. It is your responsibility as a prospective renter to ascertain the security deposit amount and the conditions governing its retention.
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