A deposit is a standard on the rental market. Rendin was created, among other reasons, because, in our opinion, it does not work well and we want to change the standard rental model. However, for many, whether tenants or owners, it is hard to move away from it. What are the pros and cons of a deposit, and why does Rendin not want to charge it?
Let's start with the definition - a deposit is a sum of money (or valuables) paid to a service provider or tenant as security when renting or leasing an item, property or service. The role of a deposit is to provide owner compensation in the event of damage, loss, arrears or other situations that may arise from the contract.
In other words, when renting an apartment, a deposit is an amount of money that you collect in case of damage or non-payment. According to the Tenants' Rights Act, the deposit amount can be up to 12 times the rent. In practice, it is most often one rent, but there are also cases in which the owner collects two or three rents.
Advantages of a deposit
Cash up front
The deposit is primarily an additional cash injection for the owner. In Poland, there are no regulations regarding the management of this money, apart from the fact that it must be returned at the end of the lease, so the deposit can either improve the owner's budget or allow them to refurbish another apartment - of course, if they are prepared to return the amount at a later date.
On the other hand, the deposit must be returned - unless it is intended to cover damage to the premises, so a positive cash influx at the beginning of the lease may become a problem later on - unless the landlord keeps it in the account. In Poland, how the deposit is distributed it is not regulated. In Great Britain, for example, the money from the deposit for renting an apartment must be transferred to a special account and not spent until the lease ends.
Safeguard
Of course, the deposit is a form of security against problems. In the event of non-payment, it can be withheld. Similarly, in the event of damage to the kitchen equipment, electronics, beds or decorative elements, chipped plaster or damage to any other appliances.
The problem is that the deposit is usually too low compared to the possible problems. Already in 2022, in a study conducted by Rendin in cooperation with the Mieszkanicznik Association, in the event of problems with tenants, the average costs amounted to almost PLN 9,000.
To cover them, a deposit of 3-4 rents would be needed, which few owners decide to do, because paying such a high deposit would be a problem even for quite wealthy tenants. This means that in the case of real problems, the deposit is not enough to renovate the apartment.
In addition, when you sign a contract for an indefinite period, the matter becomes more complicated - Even if you charge three times the rent and you come across a dishonest tenant who stops paying you, you can start the contract termination procedures at the earliest after the tenant has not settled for three settlement periods. So even then, the entire deposit, assuming you manage to get rid of such a tenant, will go towards covering rent - says Piotr Dmowski from Rendin's customer support department about such a case.
Tenant verification
Taking a certain amount of cash upfront is a form of screening the tenant. It eliminates those candidates who are unable to save up money for a deposit, meaning those who do not earn enough, do not know how to plan or save, are financially or otherwise irresponsible.
As with the security deposit, this is not an ideal solution. Of course, it eliminates the most helpless tenants, but it does not provide any other verification. Landlords must additionally verify tenants themselves.
In the case of Rendin, we replace this feature of the deposit with verification of the tenant's late payments or unpaid debts in BIG. This is of course also a solution that is not able to protect against all problems (such as job loss), but in such cases, the owner will be supported by our customer service team.
A proper contract and a deposit are not enough. This set works perfectly when there are no problems. But when they appear, they are not enough to solve them, says Alain Aun, CEO and co-founder of Rendin .
We change the rental industry
In Poland, the rental laws favor the tenants, even in cases of fraud. At Rendin, we champion fairness for both parties! Our solution supports equitable rental relationships by providing landlords with:
Professional legal aid whenever they need it
Rent payment guarantee
Property damage reimbursement
We envision modern property renting as simple, accessible, and, most of all, secure for both landlords and tenants.
Disadvantages of deposit
Tax
Not every landlord is aware, but when a landlord keeps a deposit, it becomes part of the rental income. You have to pay income tax on it - even though a large part of it may cover damages.
In the case of Rendin securing the lease, only the refund of money intended to cover damages is subject to taxation. - Arrears related in particular to the rent of the residential premises, fees for the supply of energy, gas, water to the residential premises and for the collection of sewage, waste and liquid waste, interest on these receivables are not subject to taxation, so the owner does not have to report them - explains legal counsel Karolina Radomyska.
It is different in the case of covering damages. - Revenues constituting compensation for damages in a residential premises are already covered by a different legal basis and these are subject to reporting and taxation - says Karolina Radomyska. They should be settled in the annual PIT.
Return
As we mentioned, the deposit should be refundable. That cash injection that you as a landlord felt at the beginning of the lease should, unless the rental property is destroyed, return it. Of course, if that money has already been spent, it can be mentally difficult.
Deposit returns or the lack thereof are one of the main causes of problems between landlords and their tenants. Especially in the case when no handover protocol was prepared when the tenant moved in, they often believe that the allegations of damage to the premises are untrue and the landlord is trying not to return the money, which was only a security.
In the case of Rendin, the problem of refunding the deposit does not exist - our model is completely fair and does not cause any potential conflicts.
Why does Rendin not charge deposit?
It is for these reasons that Rendin rents without a deposit - it is not a good way to secure the premises, unless its amount does not match the market conditions. In addition, it causes unnecessary tensions and conflicts between the parties to the lease. In addition, the lease itself becomes available to a larger number of potential tenants who do not have to freeze a large amount of money.
What other benefits does Rendin bring? Learn about the legal support we offer.