Why early termination of a lease does not mean automatic loss of the security deposit
What is a short-term lease and when can it be terminated?
Before addressing the question of the deposit, it is essential to determine whether your relationship is governed by the Act on Short-Term Residential Lease. It defines a short-term lease as a relationship established by a written contract for a fixed term, not exceeding two years, with the possibility of extension for a maximum of six years.
The Act also sets out precisely the conditions for termination for both parties. The landlord may terminate the lease in particular where the tenant fails to pay rent or utilities for more than two months, uses the flat contrary to the agreed purpose, or where another serious contractual ground arises.
The tenant, in turn, has the right to give notice if the flat has, through no fault of the tenant, become unfit for habitation, if the tenant has acquired an entitlement to social housing, or if other agreed circumstances arise for which the tenant cannot fairly be required to remain in the flat. If the lease does not meet these statutory limits, it is automatically governed by the provisions of the Civil Code.
What does the deposit (security deposit) actually serve?
Act No. 98/2014 Coll. on Short-Term Residential Lease clearly defines the purpose of the security deposit in § 5. Under the Act, it serves exclusively to secure any claims of the landlord against the tenant arising from:
- Non-payment of rent or payments for services (utilities, services),
- Damage caused to the flat or its furnishings,
- Other claims directly related to the use of the flat.
The deposit has a securing and compensatory function, not a penalising one. Its purpose is to compensate the landlord for a loss (arrears of rent) or damage (destroyed furniture), not to enrich the landlord beyond the actual damage.
By contrast, a contractual penalty is a sanction for a breach of duty. The Civil Code requires that it be agreed in writing and that it specify precisely the amount of the penalty or the manner of its determination. The landlord cannot arbitrarily transform the deposit into a penalty simply because it suits them. Case law, including decisions of the regional courts, confirms that where a contract does not contain a valid arrangement on a contractual penalty, withholding the deposit on that basis constitutes unjust enrichment of the landlord.
Early termination and the landlord's consent
A key aspect in assessing the entitlement to the return of the deposit is the legal basis for termination of the lease. In practice, a situation often arises where the landlord formally disagrees with the early departure but subsequently cooperatively takes back the keys, carries out an inspection of the flat, and allows the tenant to clear out the premises. In such a case we can speak of termination of the lease by agreement.
If the landlord knowingly and voluntarily takes the flat back, they cannot subsequently claim that you breached the contract by no longer living there. The principle prohibiting one from contradicting one's own conduct applies here (venire contra factum proprium). If the landlord agreed to take back the flat, they cannot penalise you for having left.
Failure to provide the settlement of accounts is not a ground for withholding the deposit
A common tactic of landlords is to withhold the entire deposit on the ground that they do not have the settlement from the building manager and cannot quantify the utilities. Such conduct is contrary to the principle of proportionality.
The Act lays down a clear deadline. The landlord is obliged to return the unused part of the deposit no later than within one month from the day on which the tenant vacated the flat and settled the claims. Withholding the entire sum for a hypothetical shortfall for two months of utilities is manifestly disproportionate. The landlord is obliged to act with professional care and to secure the documentation for the settlement in good time.
Practical procedure for recovering the deposit
In a situation where you have duly paid the rent, handed over the flat without damage, yet the landlord nevertheless refuses to return the deposit, it is essential to proceed systematically.
The first step should be a thorough review of the lease agreement, focusing on the institution of the contractual penalty. If the contract lacks a precisely defined sanction for early termination of the lease, the landlord has no statutory entitlement to any financial deductions on that basis.
If the landlord does not return the funds within the statutory one-month period, it is necessary to proceed with sending a qualified written demand, or rather a pre-action demand. In it, one must argue the absence of a legal basis for withholding the deposit and the absence of any proven damage.
At the same time, it is important to strictly reject attempts to set off fictitious costs, such as, e.g., ordinary cleaning, carpet cleaning, or window washing after the end of the lease. These items represent the landlord's standard costs of preparing the flat for the next client or rather tenant.
Conclusion
Withholding the deposit under the guise of fictitious sanctions is unfortunately common practice. If you duly terminated the lease (whether by agreement or by expiry of the notice period) and handed over the flat in order, the money belongs to you. The landlord cannot abuse their stronger position for unjust enrichment.
If you are dealing with a problem of an unreturned deposit, feel that the landlord is artificially creating claims for damage, or want to prepare for the termination of a lease so as not to lose your money, it is important to act decisively and professionally.
Do you need to have your lease agreement assessed, prepare a pre-action demand, or be represented in a dispute over the return of a deposit? Contact us for professional legal assistance and book a consultation through our reservation system.