Deposit Specification Requirements: What Must a Deposit Comply With?
A **deposit** is an amount that a tenant or buyer temporarily pays to a landlord, seller or other party as security for compliance with an agreement, such as a lease agreement or purchase contract. To be valid, a deposit must meet specific **requirements**, as laid down by law. These requirements ensure that the deposit is clear, lawful and protective for both parties. In this article, we explain what those requirements are, how they work in practice and what to do if there is any doubt.
What Are the Legal Requirements for a Deposit?
The most important legal rules for a deposit can be found in the Civil Code (BW), particularly in the articles on guarantee and burden of proof. In addition, the General Tenancy Act and the Real Estate Purchase Act also play a role, depending on the type of agreement.
1. Written Documentation
A deposit must be **documented in writing**. This means there must be an agreement or a separate document stating the following:
- The **amount** of the deposit.
- The **purpose** of the deposit (for example: security for damage or rent arrears).
- The **period** within which the deposit must be refunded (for example after termination of the lease agreement).
- The **parties** involved (tenant, landlord, etc.).
Legal basis: Article 6:248 BW (on guarantee) and Article 7:900 BW (on burden of proof).
2. Reasonable Amount
A deposit must be **reasonable** in proportion to the possible damage or costs that the landlord or seller may incur. There is no fixed maximum, but a deposit that is clearly disproportionately high may be considered **unfair**. For example:
- A deposit of €5,000 for a rental property with a monthly rent of €800 is probably too high.
- A deposit of €200 for a studio with a rent of €600 is usually acceptable.
Legal basis: Article 6:248 BW (guarantee) and case law on reasonableness and fairness (Art. 6:248(2) BW).
3. Clear Refund Conditions
The deposit must be refunded to the tenant or buyer when the agreement has been terminated and there is no damage or debts outstanding. The refund conditions must be clear, for example:
- When is the deposit refunded? (for example within 1 month after vacating the property).
- Why can the deposit be withheld? (for example for unpaid rent, damage or cleaning).
Example: If a tenant terminates a tenancy, the landlord must refund the deposit within a reasonable period, unless damage has been caused. If the landlord wrongfully withholds the deposit, the tenant can challenge this legally.
4. No Mingling with Other Amounts
A deposit may not be mingled with other amounts, such as the last month's rent or cleaning costs. This would lead to uncertainty and may cause legal problems. For example:
- A landlord may not automatically deduct the deposit from the last month's rent without clearly communicating this.
- If there is damage, the landlord must provide a separate overview of the costs and how they are deducted from the deposit.
5. Burden of Proof of the Landlord
If the landlord or seller withholds the deposit in whole or in part, he or she must **provide proof** that this is lawful. This may include, for example:
- An invoice for repaired damage.
- An overview of unpaid rent.
- A report from a cleaning company.
Legal basis: Article 7:900 BW (burden of proof) and Article 6:248 BW (guarantee).
Practical Examples of Deposit Specification
Below are two examples of how a deposit can be correctly and incorrectly documented.
Correct Deposit Specification (in a Lease Agreement)
| Element | Description |
|---|---|
| Amount | The deposit amounts to €500. |
| Purpose | The deposit serves as security for possible damage to the ``` |