The process of renting an apartment involves concluding an agreement that specifies the cost of living, which is pre-agreed and strictly fixed. But in addition to this, more and more often, landlords require payment of a security deposit. What is a deposit when renting an apartment and what is its purpose?
A security deposit is one of the elements of the lease agreement, which serves as a guarantee of ensuring the interests of the landlord in a situation where the property is damaged as a result of the actions of the tenant, if the tenant fails to pay utility bills or in other negative circumstances.
The process of transferring residential premises for rent is regulated by Chapter 35 of the Civil Code of the Russian Federation. At the same time, the term security deposit when renting an apartment does not have a legal definition and arose due to the rules of business turnover in a certain field of activity.
First of all, it is necessary to understand that the security deposit is not a deposit at all and not the amount of payment for the last month of residence.
This instrument, of course, has other names, in particular, a security deposit or a security payment, but its difference with an advance payment and a deposit is very significant and a lack of understanding of this difference can provoke the emergence of inconsistencies upon completion of the lease relationship.
The essence of the security deposit is that the landlord receives from the tenant a certain agreed amount to cover possible damage that the tenant may cause to the rental property.[/box]
What is it for?
The security deposit is important primarily for the landlord because:
- property is protected in case of possible damage;
- the risk of non-payment of utility bills by tenants is prevented.
In general, the presence of a security deposit is a guarantee of peace of mind for the owner. At the end of the rental period, he can inspect his property for damage and if anything is damaged, the damage can be reimbursed from the security deposit.
The same applies to communal services - often residents move out of a rented apartment without paying for the services for the last month and the owner has to pay a decent amount from his own funds, and with a security deposit this situation is practically eliminated.
Purpose of opening a deposit
Citizens open deposit accounts for two main purposes. The first is to ensure the safety of personal funds. Storing them at home under the pillow is not always rational and safe. The second is receiving profit in the form of interest.
In practice, it turns out that by opening a deposit, the client first of all protects his capital from the influence of inflation. This event does not bring much profit; inflation eats up the accrued interest quite seriously.
For example, for 2021 the overall inflation rate was 4.27%. That is exactly how much the funds of a citizen who kept them under his pillow would depreciate. And the average interest rate on deposits in 2018 was approximately 5.5%. So it turns out that the actual profit from placing a deposit only slightly exceeded 1%.
In practice, it turns out that by opening a deposit, the client first of all protects his capital from the influence of inflation
Despite the low actual profit, it is worth opening deposits. This is an excellent tool for preserving capital and protecting it from the effects of inflation.
Difference between collateral
The concepts of collateral and security deposit are quite often confused or considered synonymous, which is absolutely not true.
It is worth taking a closer look at the difference between a pledge and a security deposit from a legal point of view:
- A deposit is an amount that is paid to confirm the rental of an apartment, while the deposit is intended to insure the integrity of the property.
- The security deposit is taken at the time of signing the lease agreement and is, as a rule, the amount of the monthly payment for accommodation; the amount of the security deposit can vary within different limits depending on the value of the property and is negotiated individually.
- The deposit is usually counted towards the rental payment, and the deposit is returned at the end of the rental period in full if there is no damage to the property.
How to apply?
The security deposit acts as insurance for the “purity” of the transaction only if the fact of its payment is recorded in a separate clause in the lease contract.
It must clearly state the purpose of the contribution (security deposit or security deposit) and its amount, in numbers and in words.
If the contract also contains the signature of an intermediary (realtor), he acts as a guarantor of the use of the contribution for its intended purpose.
By affixing his signature, the intermediary undertakes to act as an “arbitrator” in the event of controversial situations related to the use of collateral or deposit. This is included in the cost of the intermediary's services (at least for realtors who value their reputation).
Deposit or collateral funds can be handed over personally to the owner or transferred to his current account. In the second case, the presence of a receipt from the bank by the tenant serves as an additional guarantee that the landlord has received the security amount (of course, if this is indicated in the purpose of the bank payment).
In what cases should I charge?
Based on current practice, a security deposit will not be superfluous for any rental housing, be it an economy class home or a luxury apartment. Moreover, property owners in large cities are likely to refuse to rent if they do not agree to pay a security deposit.
To prevent disputes regarding the payment and return of the deposit, the parties must enter into an additional agreement attached to the rental agreement.
Simultaneously with the conclusion of the agreement, an act on the transfer of property is drawn up, which must contain:
- An inventory of all property that the tenant receives for use along with the apartment (furniture, household appliances, plumbing, etc.).
- An accurate description of each individual item, including its characteristics and current condition (any defects, abrasions, etc. must be described).
- Current status of payment of utility bills (whether there is a debt or not).
It is advisable to stipulate in the rental agreement the procedure for making a security deposit and deducting the amount of damage from this contribution, the method for determining the damage caused, the procedure for returning the security deposit and the maximum period allowed for this.
The act can be supplemented with photographs of the apartment and property. At the end of the lease, an act of return of the property is drawn up, which becomes the basis for the return of the deposit.
Drawing up an act of acceptance and transfer of property is not a mandatory requirement, but its presence is beneficial to both the tenant and the lessor.
The absence of an inventory of the property makes any statement of the parties unfounded, that is, it will not be possible to prove that the property was in poor condition, just as it will not be possible to prove that it was the tenant who caused some damage.
And if the landlord turns out to be dishonest, then getting the deposit back will be quite difficult or simply impossible; any payment must be fixed in the contract.
Rent an apartment with a deposit: how to arrange it and who benefits from it
What is a security deposit and why is it needed?
First of all, the security deposit is not a deposit or payment for the last month of rent, contrary to popular belief.
It does have other names: for example, security deposit, security deposit. But it is important to understand that the differences between a deposit and an advance payment are significant, and failure to understand this difference can lead to conflicts in completing the lease agreement. The essence of the security deposit is that the tenant transfers to the owner the amount agreed upon by both parties (often it is equal to a month's rent, hence the confusion). This amount is set aside in case the apartment or property located in it is damaged.
The security deposit is a kind of refundable amount that cannot be used as payment for the last month and is in no way related to the rental deposit. The security deposit is a certain contribution equal to one rental rate, which guarantees the owner that he will not remain “in the red”, even if the tenants break a table, chair or destroy the microwave. Let's look at an example.
The lease agreement has expired, the tenants have paid for the last month spent in the apartment, and are already packing their bags. This is where the “deposit” comes into play. The owner inspects the apartment, checks with the tenants to see if everything is in order with the furniture, appliances, and bills. At the same moment, he assesses the amount of damage, possible repairs and other possible investments that will have to be used to bring the apartment to its original form. After deducting these costs, the owner must return the deposit to the tenants. If there are no claims and no damage, then the full amount of the security deposit is returned to the tenants. Thus, the main task of the deposit is to protect the interests of the apartment owner and his peace of mind.
Some experts agree that it is more correct to call the deposit a security deposit. Its meaning is inherent in the name itself - this payment “ensures” or “guarantees” that tenants will be careful with the apartment, furniture, and so on. If not, the owner is calm, he has a “safety cushion” in the form of an amount, most often equal to one monthly rent payment.
What is the difference between a security deposit and a security deposit?
A deposit or deposit is initially called the amount that a potential tenant pays so that the apartment “does not go away.” With this amount of money, he, as it were, “books” housing, confirms his intention to rent it in the near future. However, in this understanding, the term “deposit” when renting apartments is used extremely rarely today. If you see the wording “deposit - one month” in an ad, you should know that we are most likely talking about a security deposit.
The deposit is taken at the time of concluding the rental agreement and, as a rule, it is equal to the monthly rental cost. Important: the security deposit is never accepted as payment for the last month of stay, it is not payment, it is a “fireproof amount” in case of damage to the property. To summarize, we conclude: “deposit” and “security deposit” are the same thing, but only if we are talking about a security payment.
Can the security deposit only be used to cover damages when the tenant moves out?
The security deposit and the last month's prepayment are completely different things. But, if this is specified in the contract, the deposit can be used to pay for the last month of residence. However, apartment owners are not always willing to follow this path. After all, it turns out that the last month that the tenants spend in the apartment is not financially secure. If during this period the tenants break the closet, the owner will repair it at his own expense. But if the tenants have been quiet and peaceful all year, and maybe more, they are unlikely to want to destroy everything around them in the end.
Is it possible to save on a security deposit?
It is not profitable for a sane owner to do without a security payment at all, since it protects the property from damage. An exception where a mandatory deposit is not required is perhaps a room that the owners rent out and live in the same apartment themselves. Why do they take this risk? Yes, because they themselves can monitor the condition of the property and timely payment of utilities at any time. Another exception to the rule is a “killed” apartment. Otherwise, a deposit is asked in 99% of cases.
The deposit is issued upon signing the rental agreement. The owner draws up an act of acceptance and transfer of property, in which he lists everything: furniture, plumbing fixtures, household appliances, and so on. The same act records the condition of the property and possible defects (cracks, chips). You can even take photographs of the apartment and transfer a set of photographs to each party. If the contract is concluded through an agency, this is most likely included in the standard package). At this stage, it makes sense for a potential tenant to ask about possible debts on utility bills and other payments in order to avoid unpleasant situations in the future.
As for savings, the deposit is often divided into several parts and the entire amount is paid back within 2-3 months. The deadline and procedure for making this payment are indicated in the contract: when to make, in what shares, within what time frame. If desired, you can include a clause in the contract: “with the written consent of the owner, the deposit can be used to pay for the last month.” The basis for the return of the deposit will be an act of acceptance and transfer of property signed by both parties.
In what cases can you do without a deposit?
In some cases, there may be no security deposit, for example, if:
- the tenant is given a completely empty apartment, without furniture or equipment, that is, there is nothing to spoil;
- the apartment is in poor condition and requires significant repairs;
- rent is paid weekly or 2-3 times a month, which allows the landlord to check his property in a timely manner;
- it is not an apartment, but a room that is rented, while the landlord lives in the same apartment and has the opportunity to constantly monitor the condition of the property;
- the landlord is not afraid of possible expenses and damage to property, which is not considered illegal, since the requirement and payment of the security deposit is considered voluntary.
Deposit insurance system
The state created the Deposit Insurance Agency, which compensates depositors for losses in the event of force majeure. For example, if a bank goes bankrupt or its license is revoked.
Every deposit account opened in Russian banks is necessarily insured. The cost of insurance is borne by the bank. The depositor does not pay anything for this, but you need to understand that the bank covers the insurance costs by setting a lower rate.
There is a limit on the amount insured. Protection covers only up to 1.4 million rubles (until recently it was only up to 700,000 rubles). This is the amount including interest. If a client keeps, say, 2 million rubles on deposit, then if an insured event occurs, he will receive only 1.4 million from the DIA, and the remaining money will have to be recovered in court. And it’s not a fact that everything will end well.
It is precisely because of the limitation on the amount of insurance that depositors often do not keep more than 1.4 million rubles in one bank. This is unsafe, especially if we are not talking about a bank with state participation, or a small organization.
Every deposit account opened in Russian banks is necessarily insured. The cost of insurance is borne by the bank
When an insured event occurs, the DIA conducts proceedings and within 7 days after the event publishes information about where and when you can apply for compensation. A bank is selected through which depositors will return their hard-earned money. There are usually no problems or delays with reimbursement.
Please note that only deposit accounts opened in banks are subject to insurance. If you have invested money in a microcredit company, deposit insurance does not cover this transaction.
Types of deposits
What is a bank deposit? This is a regular account, but it can be opened under different conditions. Banks offer opening deposits under three main programs:
- Poste restante. This is an account that cannot be called a full-fledged deposit. There are no conditions for its use, the client can perform any operations he likes, but the rate is usually set at 0.1%.
- Urgent. The client opens a deposit for a certain period at a set percentage. For the duration of the agreement, he “forgets” about the existence of the account and cannot perform any transactions with it. Such programs are subject to the highest interest rates, which can be accrued both periodically and at the end of the funds placement period.
- Cumulative. Deposit programs that provide an expanded list of client options. He can partially withdraw funds up to a certain limit, or replenish the deposit. The more possible options, the lower the rate, but such programs still attract citizens. Especially those who use a deposit as a tool for accumulating funds for a specific purpose.
It is impossible to say unequivocally which type of deposit is better. For one client, urgent is convenient, for another, cumulative. Here you need to focus on your needs.
Banks offer opening deposits under three main programs
Each deposit program has its own terms for concluding an agreement. If we are talking about 3, 6 or 9 months, such deposits can be characterized as short-term. The longest terms are 1-3 years. The period for placing deposits is usually calculated in days.
Comments: 1
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Author of the article Irina Rusanova
Consultant, author Popovich Anna
Financial author Olga Pikhotskaya
- Tatyana
06/14/2021 at 17:35 Cool article, written in simple language.
Thank you. Everything is clear Reply ↓
Taxation of deposits
Bank deposits are financial instruments from which the depositor makes a profit. And profits, as you know, are taxed in Russia. But special conditions apply to deposits. According to the law, taxation applies to deposits whose rate exceeds the refinancing rate of the Central Bank by 5%. But in fact, no bank charges such high interest rates, so depositors shouldn’t even think about taxes.
According to the law, taxation applies to deposits, the rate on which exceeds the refinancing rate of the Central Bank by 5%.
