Security Deposits and Advance Rent
Understand the rules on security deposits and advance rent under the Rent Control Act. Learn the maximum amounts, proper handling, and the deposit return process.
Maximum Deposit and Advance Rent
“No lessor or his/her agent shall require the lessee to pay more than one (1) month advance rent and more than two (2) months deposit which shall be kept in a bank under the lessor's account. Any deposit shall be returned to the lessee upon the expiration of the lease after deducting any unpaid rent or damages to the leased premises attributable to the lessee.”
What This Means
The Rent Control Act limits what a landlord can collect upfront: maximum 1 month ADVANCE rent + 2 months SECURITY DEPOSIT = 3 months total. This prevents landlords from making entry unaffordable for low-income tenants. The deposit must be kept in a bank (not commingled with the landlord's personal funds). Upon lease termination, the deposit must be returned after deducting: (1) unpaid rent, and (2) damages to the unit beyond normal wear and tear. Any excess must be returned to the tenant. Landlords who refuse to return deposits face legal action.
- Maximum: 1 month advance rent + 2 months security deposit = 3 months total
- Deposit must be kept in a bank under the landlord's account
- Cannot require more than these amounts (e.g., "3 months advance + 3 months deposit" is ILLEGAL)
- Deposit returned at lease end: less unpaid rent and damages
- Normal wear and tear is NOT deductible. only actual damages
Real-World Scenario
A landlord requires new tenants to pay: 2 months advance rent, 2 months security deposit, and 1 month "goodwill money." Total upfront: 5 months' rent. Monthly rent is P8,000 (covered unit).
Is this collection legal?
Legitimate Deposit Deductions
“Any deposit shall be returned to the lessee upon the expiration of the lease after deducting any unpaid rent or damages to the leased premises attributable to the lessee. Normal wear and tear shall not be a ground for deduction.”
What This Means
The landlord can only deduct from the deposit for two reasons: (1) Unpaid rent. any months the tenant failed to pay. (2) Damages to the unit. beyond "normal wear and tear." Normal wear and tear includes: faded paint, minor scuff marks, worn flooring from daily use, loose hinges from regular use. NOT normal wear and tear: holes in walls, broken windows, missing fixtures, stained/burned surfaces, broken appliances (if landlord-provided). Best practice: conduct a move-in inspection (with photos) and a move-out inspection (with photos) to document the unit's condition and fairly assess damages.
- Only 2 valid deductions: unpaid rent and actual damages
- Normal wear and tear: NOT deductible (faded paint, minor wear)
- Damages: holes, broken items, missing fixtures. deductible
- Document condition at move-in AND move-out (photos, checklist)
- Any amount not deducted must be RETURNED to the tenant
Real-World Scenario
After a 3-year tenancy, the landlord inspects the unit and finds: faded and slightly dirty walls, a cracked window, a missing bathroom faucet, and worn-out vinyl flooring. The landlord wants to deduct the full 2-month deposit (P16,000) for "repainting, window repair, faucet replacement, and new flooring."
Which deductions are legitimate?
Deposit Return Timeline and Disputes
“Any deposit shall be returned to the lessee upon the expiration of the lease after deducting any unpaid rent or damages to the leased premises attributable to the lessee.”
What This Means
The law says the deposit must be returned "upon the expiration of the lease". meaning promptly upon move-out after inspection. While no specific number of days is stated, reasonable practice is 15-30 days after the tenant vacates and the unit is inspected. Disputes about deposit returns are common. If the landlord refuses to return: (1) Send a formal demand letter. (2) File at barangay for mediation. (3) If unresolved, file a small claims case at the Municipal Trial Court (no lawyer needed, fast resolution). Brokers managing rentals should establish clear deposit return procedures to avoid disputes.
- Return timeline: "upon expiration". practically 15-30 days after move-out
- Conduct joint move-out inspection with tenant (document with photos)
- Provide itemized deduction list if any amounts are withheld
- Tenant remedy: demand letter → barangay → small claims court
- Small claims: up to P1,000,000, no lawyer needed, decided within 30 days
Real-World Scenario
Tenant Lopez vacated a unit 3 months ago after a proper move-out inspection showing no damages and no unpaid rent. The landlord keeps delaying the P14,000 deposit return, giving excuses like "I'll send it next week" and "the bank processing takes time."
What are Tenant Lopez's options to recover the deposit?
Frequently Asked Questions
Can a tenant use the security deposit as payment for the last 2 months of rent?
This is a very common request but is technically NOT proper. the deposit is security for damages, not prepaid rent. However, in practice, many tenants do this (especially when moving out). If the tenant applies the deposit as last month's rent, the landlord has no security for potential damages upon move-out. Best practice: the tenant pays rent through the end of the lease, and the landlord returns the deposit after inspection. Lease contracts often explicitly prohibit applying the deposit as rent.
Does the deposit earn interest while held by the landlord?
The Rent Control Act requires the deposit to be kept "in a bank" but does not specify whether interest accrues to the landlord or tenant. In most cases, the interest (if any, given typical savings account rates) is negligible. However, some lawyers argue the interest should belong to the tenant since it is their money. In practice, landlords rarely keep deposits in interest-bearing accounts dedicated to a single tenant. Unless the lease contract specifies otherwise, the deposit is typically returned at the original amount.
Can a landlord increase the deposit when rent increases?
Yes. If the monthly rent increases (within the 7% cap), the landlord can proportionally adjust the deposit to maintain the 2-month equivalent. For example, if rent goes from P8,000 to P8,560 (7% increase), the landlord can request an additional P1,120 deposit (difference between 2 × P8,560 and 2 × P8,000) to bring the total deposit to P17,120. However, this additional collection should be gradual or spread over the lease period. demanding it as a lump sum upon renewal may be impractical for tenants.