Residential Tenancy Law – on the procedure of use of the security deposit

After reviewing the new Residential Tenancy Law, it can be concluded that it has several positive changes that balance the legal interests of the renter and the tenant. However, several provisions of the new Residential Tenancy Law are disappointing, because they replace the positive provisions of the old law “On Residential Tenancy” that were in force for a long time.

The first positive provision of the law “On Residential Tenancy” that was not included in the new Residential Tenancy Law, is related to the amount of the security deposit. Section 12 of the new Residential Tenancy Law provides that the renter, upon signing a contract on the rent of residential premises, is entitled to request the tenant to pay a security deposit to ensure the fulfilment of the contract on the rent of the residential premises. The security deposit cannot exceed two-months’ rent. Section 121, Paragraph One of the old law “On Residential Tenancy” provided that the renter is entitled to request the tenant to pay a security deposit to ensure the fulfilment of the contract on the rent of residential premises, and the amount of the security deposit was not limited by law.

The law “On Residential Tenancy” did not stipulate the amount of the security deposit. Therefore, the parties, upon signing a contract on the rent of residential premises, were entitled to exercise the advantages provided by the principle of private autonomy, namely, agree upon the amount of the security deposit. This provision of the old law “On Residential Tenancy” not only protected the interests of the renter, but also those of the tenant, especially in cases where the tenant encountered financial difficulties.

Another positive provision of the law “On Residential Tenancy” that was not included in the new Residential Tenancy Law is in regard to the procedure of use of the security deposit. Section 12, Paragraph Two of the new Residential Tenancy Law provides that the renter, upon the expiration of the contract on the rent of residential premises, is entitled to use the security deposit to cover delayed payments provided in the contract on the rent of residential premises. Section 8 of the Residential Tenancy Law provides that the contract on the rent of residential premises shall include the amount of the rent and the amount of fees for the services related to the use of the residential premises.

Based on the provisions of Section 8 and 12 of the new Residential Tenancy Law, it can be concluded that the renter is only entitled to use the security deposit to cover the delayed payments provided in the contract on the rent of residential premises, but not to cover damage caused to the residential premises or the renter’s property located in the premises. Section 121 of the old law “On Residential Tenancy” provided that the renter was entitled to use the security deposit to compensate damages.

After a general assessment of the concept of the security deposit included in the Residential Tenancy Law, it can be concluded that the legislator has tried to protect the legal interests of the tenant more, thereby protecting the tenant against an unreasonably high security deposit and unjustified use of the security deposit. The concept of the security deposit included in the new Residential Tenancy Law does not protect the interests of the renter, if the tenant has caused damage to the premises or the renter’s property. This can lead to a situation where other means of protection will be used, for example, guarantor’s institute, which may complicate the process of conclusion of the contract on the rent of residential premises for the tenant.