Returning the deposit when renting

Often referred to as a security deposit, the rental security deposit is a common practice worldwide, and France is no exception. Since rental security deposits are not covered by the commercial code, the parties are free to agree on the conditions they wish, subject to certain reservations. However, the amount of this deposit must be explicitly stated in the lease agreement. The rental security deposit takes into account several rules that are necessary to know and understand.

What is a security deposit?

The security deposit, as indicated by its name, is a guarantee of rent and damages paid by the tenant. A security deposit is a kind of security deposit. It's a sum of money that serves to reassure the landlord that in case of late or non-payment of rent, they have a margin that they will receive instead of their usual rental income for a specific period. The security deposit can also be used in case repairs need to be made to the rented property. It's also possible for the landlord to withhold part of the deposit for cleaning not done.

What is the amount of the security deposit?

The amount of the security deposit is partly limited by law, whether it's the old laws or even the new 2020 rental security deposit law. It's one month for unfurnished properties. For furnished properties, it's generally two months excluding charges when the lease was signed after March 2014. Before this period, the amount of the security deposit was freely set by the landlords.

In the case of vacation rentals, the security deposit cannot exceed 20% of the total rental amount (or 25% if an intermediary - such as a real estate agency - is involved), and it cannot be required more than six months before the rental, assuming no advance payment is received. The moment the rental is taken is usually the best time to transmit it.

Refund of the security deposit

When the tenant vacates the premises, the security deposit is refunded. The parties can agree on the terms of repayment. If the tenant breaks the lease, the landlord can use the security deposit to repair this breach.

If the tenant has complied with the lease terms, the security deposit must be fully refunded at the end of the contract. The security deposit cannot be used to pay the last months' rent.

For an annual rental, the security deposit must be refunded to the tenant within two months after the end of the rental, minus any arrears or damages.

In the case of a vacation rental, the security deposit is usually refunded at the end of the rental period, but the contract may stipulate a "reasonable" longer period.

Any compensation of the security deposit at the end of the rental must be justified in all cases; it cannot be a random figure.

The refund of a furnished or unfurnished housing deposit is based on the establishment of an exit inventory. The inventory is a document that presents the general condition of a property before and after the rental period. This document attests that no damage has been done to the property during the tenancy by the tenant.

For the security deposit to be refunded in full, apart from normal wear and tear, the items examined during the entry inventory must be in the same condition after the exit inventory.

Late refund of a security deposit

A landlord has between one and two months to refund the amount of the security deposit to their tenant. If you're wondering what to do if my security deposit isn't returned after 2 months, here's the answer.

If the landlord does not return your security deposit within the deadlines, the tenant is entitled to several remedies. Firstly, they must write a security deposit refund letter reminding the landlord that the payment deadline has passed.

If despite this action the landlord still does not comply, the tenant can refer the matter to the conciliation board without spending a cent.

If despite this no agreement is reached, it's time to bring the matter to the district court armed with the conciliation board's decision.

Is it preferable to pay a security deposit or pay in advance?

Payments made to reserve a rental property, whether it's a reservation deposit or an advance payment, are often misunderstood.

The former is called "down payment," while the latter is called "deposit." They are both separate from the security deposit but are sometimes associated with it.

The situation is simpler to understand and analyze for annual rentals because there is no formal reservation; the tenant often pays one month's rent in advance.

However, for short-term furnished rentals, the situation is generally more unclear.

Unless the parties decide otherwise, any payment of this type is considered a reservation deposit, even under the amendments of the new 2021 rental security deposit law. This means that if the tenant does not accept the rental, their obligation is limited to the deposit. In case of cancellation by the landlord, the tenant is entitled to a refund of double the value of the reservation deposit. Any lease term that imposes damages on the tenant in case of cancellation and does not also provide for compensation to the tenant in case of cancellation by the landlord is not valid.

The rental is considered final when the money paid is legally recognized as an advance payment, and the tenant may be required to repay the total rental amount for the entire rental period. Similarly, if a landlord cancels a reservation after receiving a deposit, the tenant is entitled to full compensation.

Whether it's a down payment, an advance payment, or a security deposit, none of these payments can represent more than 25% of the total rental amount, and it cannot be made more than six months before the rental. In practice, this directive is often ignored because a potential tenant may wish to secure the property before the rental date.

The case of lease sale

The former tenant has the right to reclaim their deposit if the tenant transfers the lease to a new tenant. However, since the lease is renewed on the same terms, the new tenant must pay the same security deposit.

In the event of the sale of the leased property, the new owner of the property cannot demand that the tenant pay a new rental guarantee. The initial landlord remains responsible for refunding the security deposit for social housing if the property is sold. In many cases, the lease expressly allows the former landlord to transfer the deposit to the new owner. This is a reasonable clause to include because the former landlord will no longer be interested in the property.

Interests on security deposit

If the security deposit exceeds the equivalent of one payment period and is paid in advance, or if two payment periods are paid late, the landlord is legally required to pay interest to the tenant.

For each month of delay in the payment of the security deposit, the value of the amount is increased by 10%.

Taxes

Unless the security deposit is lost by the landlord, the tenant cannot deduct it as a business expense. It must appear as a cash asset on the lessor's balance sheet.

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