When
renting a house, a tenant has to give a security deposit to a landlord, which
is returned by the landlord once the contract expires. For a tenant, this
security deposit is often a big concern, as it can be a substantial amount and
has to be negotiated with a landlord.
As the Indian real estate industry is unorganized and the setting the
amount lies with the landlord. The fixation of charges for the house for
rent remains under the landlord`s decision.
Common problems faced by
tenants, with respect to security deposits
In metropolitan cities like Mumbai, Delhi, Hyderabad, etc., property
owners take advantage of the high cost of living to push for higher security
deposit amounts, with little care for the condition of the house
for rent, as the ratio of possible tenants to house
for rent properties, is in favour of the landlords.
Thus, depending on the area in the city, landlords charge between two to
six months’ rent, as security deposit.
A majority of tenants, especially in metro cities, comprise of the young
working population, who are unable to pay high amounts as security deposits for
house for
rent. At times, tenants have to give up on decent living conditions, as
they cannot afford the high deposits demanded by landlords.
Some people also resort to taking personal loans, to pay the deposit
amount.
The importance of security
deposit for a landlord
From a landlord’s perspective, the security deposit is essential for
securing due performance by the tenants, of his/her obligations under the
tenancy agreement. The landlord, under the agreement, has right to adjust the
security deposit against any arrears of house for
rent or other charges payable under the agreement.
The convention of upfront payment differs across markets. The upfront
payment is taken, to safeguard against house for
rent defaults, etc. The security deposits is currently charged as per
the convention in the micro-market and is required to be paid back in full to
the lessee, at the end of the tenure. Standard wear and tear of an apartment
for rent due to usage, is usually not charged and the tenant is
expected to give back the apartment
for rent in its original condition to the landlord. The tenant has to
often bargain, to fix a decent amount as security deposit.
Laws governing security
deposit in rental agreements
The Model Tenancy Act prescribes a cap on the amount of security deposit
to be accepted from tenant for residential premises, which is a maximum of
double the amount of rent. However, the Act does not provide for any such
maximum cap on the deposit for commercial premises.
The Act empowers the landlord to make deductions from such deposit, of
the arrears of rent and other charges and requires the landlord to refund the
remaining deposit, at the time of the tenant vacating the premises.
Dos and don’ts for
security deposits in lease agreements
·
The rental
agreement should mention the amount of security deposit given by the tenant to
the landlord and when it will be refunded.
·
Contracts
should be legally registered and signed by both the parties. There should be no
hidden clauses in the agreement.
·
Landlords
should return the security deposit, once the contract expires. If any amount is
deducted, the landlord should provide justifications for the same.
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