Security deposit for rental apartments

Czech Republic: The new Civil Code has introduced a number of changes related to security deposits

The security deposit (now referred to in the Civil Code as jistota as opposed to kauce, the term previously used by the old Civil Code) is the most important instrument by which a landlord’s rights vis-a-vis the tenant renting their apartment are protected. With respect to this legal institution, the new Civil Code has brought a number of changes effective as of 1 January 2014.

Above all, the cap on the size of deposits which may be agreed between parties has changed: under the old Civil Code, the landlord could at most demand a deposit in the amount of three times the monthly rent (including advance payments on utilities). By contrast, the new Civil Code makes it possible for landlord and tenant to agree on a security deposit of up to six months’ rent.

The new Civil Code also expands the scope of tenant’ debts which are covered by the deposit. The old Civil Code had stipulated that the landlord may use the deposit solely to settle claims for rent and for the payment of services associated with the use of the apartment and, beyond that, for the discharge of other debts of the tenant related to the lease of the apartment, but only if they had been awarded in an enforceable court decision or recognized by the tenant themselves in writing. The new Civil Code no longer contains any restrictions as regards the receivables which may be satisfied from the deposit, and the deposit may thus serve to discharge any of the tenant’s liabilities stemming from the lease of the apartment.

Another important new concept introduced by the new Civil Code is the tenant’s right to demand that the landlord return to them the deposit (minus any drawdowns because of debts owed by the tenant) along with the interest that accrued on the deposit since the day on which the tenant transferred it to the landlord, at a rate at least as high as the “statutory rate” – which, in this case, is the customary interest rate charged by banks for loans at the place of the tenant and at the time at which the lease is made. Given that the new Civil Code explicitly disallows contractual clauses between tenants and landlords which would curtail the tenant’s rights, any agreement to exclude the tenant’s right to interest, or to stipulate an interest rate below the statutory rate, would be invalid.

Source: New Civil Code (Act No. 89/2012 Coll.)

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