CAN SECURITY DEPOSIT BE CONVERTED INTO RENT?

About a week ago, I received and email from one of our clients inquiring on whether we can convert his Security Deposit into rent since he does not intend to extend his tenancy period with us it being the last month of his tenancy agreement, just like this particular client many people out there believe in the same narrative and this triggered me to make this write-up. This brief article intends to address the misunderstandings surrounding the concept of Security deposit such as when should it refunded, can it be converted into rent and also try to provide best practices on how to execute a proper Security Deposit Clause in a Tenancy Agreement.

Security Deposit is a creature of the Statute provided for under Section 30 of the Landlord and Tenant Act Cap 238 which is to the effect that a landlord shall require a tenant to pay a security deposit for the purposes of securing the performance by the tenant of the obligations of the tenant. The section further goes ahead to state that the landlord shall not ask for an amount more than the rent paid for one month. This money is paid at the beginning of a tenancy period by the tenant and it is supposed to be strictly equivalent to one month rent.

Often times Tenants at certain point during the tenancy will ask landlords to convert their security deposit into rent, on the other hand many landlords find it extremely difficult to refund the security deposit as this money is already spent by the time of the termination of the Tenancy agreement. This background brings us to two common questions, one being ``can security deposit be converted into rent? `` And the other ``when should security deposit be refunded? ``

The most appropriate answer is that Security deposit cannot be converted into rent, the rationale behind this goes back to the intention of section 30 of the Land and Tenants Act which is securing the performance of the obligations by the tenant during the tenancy period, therefore converting security deposit cripples the spirit of the law.

Then what is the best way to implement the Security Deposit Clause in a Tenancy Agreement.

Like it has always been said, the best way to avoid disputes in Agreements/ contracts implementation is by avoiding ambiguity and exercising utmost clarity during drafting. For instance, while drafting the Tenancy agreement, it is advisable that the Security deposit Clause should have express terms on how they are to be implemented.

For example, by clearly stating the grounds on which Security Deposit can be withheld/ deducted by the landlord and time frame/ period in which it should be refunded. For instance, clearly stating in your Tenancy agreement that Security Deposit does not convert into rent and it shall be refunded in the first seven (7) days after the termination of the Tenancy agreement.

By doing so the tenant will be certain of when to receive back his security deposit, on the other hand the landlord will have ample time to make appropriate inspections, assess the damage caused during the tenancy period and hence forth make appropriate deductions from the Security Deposit.

It should be noted however that Security deposit shall not be withheld / deducted on account of normal wear and tear resulting from ordinary use of the premises.

In conclusion the security deposit Clause is one of the most misunderstood clauses by the landlords and tenants and it often times leads to disputes at the end of a tenancy period, however with clarity and proper drafting, it can lead to a smooth termination of tenancy relationship as detailed in this article above. Should you seek more details on the same or related topic, our inbox is open and don’t hesitate to reach us out. Additionally let me know how you have implemented the Security Deposit Clauses in your Tenancy Agreements out there in the comment section.