Agree on the provision of a security deposit as you sign the lease. Both the landlord and the tenant may provide a security deposit. A security deposit provided for the landlord is withheld by the landlord throughout the lease in case the tenant neglects their obligations deriving from the agreement.
Amount and type of security deposit
The law sets the maximum security deposit to be an amount equal to three months of rent for a residential lease. This limitation does not apply for business premises. Any reasonable security deposit is legally allowed. The security deposit may be money, a wire transfer, or a guarantee. Most commonly, security deposits are monetary. The tenant pays the deposit and the landlord returns it after the lease if the tenant has fulfilled all contractual obligations. The landlord must keep the security deposit separate from any other assets.
Another common security deposit is a depository receipt. If you accept a depository receipt, note that it includes a bank account pledge stating that the bank will agree not to use the funds on the deposit account to pay off any debts by the tenant. A condition is included in the agreement, stating that this is the security deposit for the lease. You should also make sure that withdrawing funds does not require tenant consent. The landlord should be able to withdraw funds if a need arises to withhold the security deposit. For depository receipts, make sure to agree on who receives interest. For instance, you may agree to make the deposit for the tenant but to add interest to the capital. This ensures that the value of the deposit stays better up-to-date as the rent increases. On the other hand, you may also adjust the security deposit if the rent is updated.
The tenant may also have a financial commitment by Kela that can be used instead of a monetary security deposit. This commitment covers the possibility of the tenant not fulfilling their lease obligations. At Kela, this commitment is called a rental security deposit. A tenant may apply for Kela’s rental security deposit when seeking an apartment. The terms of the rental security deposit are stated in the financial commitment that Kela provides to the tenant. More information on Kela’s rental security deposit is available here.
As you are contemplating the security deposit, you should pay attention to its liquidation probabilities. Money is unquestionably the simplest form of security deposit and immediately available to its beneficiary. However, a court order may be required for a depository receipt if the deposit terms do not state that the funds are freely available to the landlord. The same applies for guarantees if the guarantor is not willing to make the payment. A security deposit may not be liquidated without proper grounds.
Agreeing on a security deposit
A security deposit may be applied to cover for missed rent payments or other neglected contractual obligations. You should state in the agreement that the security deposit covers neglect of any and all lease agreement obligations. This ensures that the security deposit is also available for any repairs required in case where the tenant damages the apartment. Regardless of any unclear verbiage in the agreement, it is the opinion of the Finnish Landlord Association that a security deposit may be used to cover any neglect of contractual obligations.
The provision of a security deposit should be confirmed with a date in the lease agreement. This date should precede handing keys to the apartment. If the security deposit has not been provided by the agreed date, the landlord has the right to rescind the agreement. However, if the security deposit is provided before the notice of rescission of the lease agreement is received, no right to rescind exists. Since it is much more difficult to rescind an agreement when the tenant has possession of the apartment, it is important to make sure that the security deposit has been provided before handing over the keys.