What is a security deposit?
A sum of money that a tenant pays to the landlord, which provides monetary security to the landlord, in case of damage to the apartment or failure by the tenant to comply with the agreement (such as moving out before the lease ends). This sum of money is then returned at the end of the lease, minus any deductions for repairs, to the tenant.
Sounds simple enough, right? Wrong – it is quite a controversial topic, and the innocuous security deposit morphs into various forms depending on the location, the kind of landlord, who the tenant is.
Now picture this – Shreya Ramakrishnan (name changed), moved to Bengaluru earlier this year to begin her very first job. The excitement of moving to a new city, staying in her own house, and doing it all up was very high.
She spent the first week looking for accommodation and by the end of the week was not just disappointed but frustrated at the amount of security deposit each landlord was demanding from her.
Ultimately because of not being able to afford the 10 months security deposit, she decided to stay as a paying guest in a house already occupied by three other working women. Not what she imagined, but this is what she could afford given the situation in Bengaluru.
Demanding a change in this system and wanting to standardise security deposits is Waseem Memon, a resident of Bengaluru and founder of The Drive Without Borders Foundation. He is making a case in favour of standardising the security deposit to be collected by the landlords – fixing it at 1 – 3 months.
The Government had mooted the concept of a Model Residential Tenancy Act in 2011, in which the idea of capping Security Deposits was introduced. It has been over 6 years now, to no avail.
In my conversation with Waseem, he mentioned how Bengaluru has a large population coming in from various cities and the high charges of security deposits make it rather difficult for young working professionals to find good accommodation. The norms pertaining to security deposit varies from city to city.
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While in Delhi, landlords charge three to six months rent as security deposit, in southern cities of Bengaluru and Chennai, ten months rent, as the deposit is the general unwritten rule.
Waseem says, “For a landlord leasing his house, if he is able to get 10 months rent as security deposit and there is no law which prohibits him from charging it then why will he not? It is a tax-free deposit after all. Therefore, it is the need of the hour for intervention from the government to regularize this.”
Hema Chordia, one of the promoters of Shanti Builders in Chennai says, “ We usually lease out our properties to corporates who do not shy away from paying between 6 to 10 months rent as security deposit. We have a few individual leases, where we are fine with reducing it after mutual discussion. As the name suggests, the amount is taken just as a precautionary measure. We have had cases where the tenant just refused to pay maintenance or even rent sometimes, so we need to have a safety net.”
While there are views from both sides of the argument, a direction or a regulation from the Government would do a world of good to rationalize and standardize this practice.
Schemes of events:
2011 – The Ministry of Housing and Urban Poverty Alleviation had drafted a Model Residential Tenancy Act, 2011 to all State governments to “debate, discuss, to hold consultations and implement it” in keeping with the states’ requirements. The Act had touched upon the issue of making it unlawful for a landlord to charge more than three months’ rent as security deposit.
2015 – A draft Model Tenancy Act 2015 was issued by the Union government and circulated to the state government for consideration. But till date, there has been no action from the state government.
August 16th 2015 – A representation was sent by Waseem to Chief Secretary of Karnataka to regulate rental deposits. The Chief Secretary forwarded the representation to the Deputy Commissioner of Bangalore to consider the case. However, despite several follow-ups, nothing came out of it.
February 18th 2017 – A Public Interest Litigation (PIL) was filed in the Karnataka High Court. During the hearing, the Additional Advocate General brought to the notice of the petitioner that Secretary of Housing should also have been sent the representation.
March 7th 2017 – The PIL was dismissed with an order asking the Petitioner to send a detailed representation to the Secretary of Housing.
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