When an individual rents a house, a contract is settled in which both the proprietary and the tenant agree on the current conditions of the property. It includes a brief description of everything it does and does not include, thus guaranteeing a healthy coexistence prior, during, and at the end of the contract.
A security deposit is that which is used in house rental.
Security deposits are considered a debt, thus they do not generate any Value Added Tax (IVA). They are also not considered as income, therefore they do not produce income taxes (ISR).
How does a security deposit work?
The tenant grants the proprietary a given amount of money, usually amounting to the total value of one month of rent. This is provided as a warranty concept for any potential damage or debt related to the property being rented.
In most of the cases, this deposit is devolved to the tenant once the contract concludes. However, there are certain situations that may excuse the proprietary to withhold the deposit and use it.
Frequent motives for deposit loss:
- Failing to return the property as stipulated in the contract. Rather, it is devolved with greater damages or defective services.
- Physical deteriorations caused by regular use, such as worn out paint, or structural fractures caused by situations beyond the tenant’s control, including natural disasters or decayed water, gas, and electric installations.
- Damages caused by the tenant, including broken windows, doors, or floors, excess dirt, or improper use of installations.
- Carrying out modifications without consent. The deposit is therefore used to make the necessary reparations, or even claim compensation for damages.
Once the contract is terminated, the proprietary has a deadline of up to 60 days to verify that the property is returned in adequate conditions, and that no debts or other irregularities are still in existence. In the case that damages have been made, the deposit can be used in the benefit of the property, or otherwise be returned.
In QuAdrans law and finance we offer the real estate service to help you carry out the security deposit. Our real estate advisors will guide you throughout all procedures you require.
