In lease agreements, the deposit (security deposit) is a form of security taken in order to guarantee the lessor’s claims arising from the lease relationship and to protect interests related to the leased property. Especially in recent years, due to high inflation and significant increases in rental prices, the question of on what amount the deposit should be returned after the termination of the lease agreement has become the subject of important disputes in practice.
Although Article 342 of the Turkish Code of Obligations regulates the amount of the security deposit and its method of holding, it does not explicitly state on which value the deposit should be refunded upon termination of the contract. Therefore, the issue is largely shaped within the framework of the Supreme Court case law and the principle of equitable justice accepted in doctrine.
I. Legal Nature of the Deposit
The deposit is a security instrument that ensures the tenant fulfills its obligations arising from the lease agreement. According to Article 342 of the Turkish Code of Obligations, the security deposit agreed upon in residential and roofed workplace leases cannot exceed three months’ rent.
The deposit is not considered income or a penalty clause belonging to the lessor. The lessor may only resort to this security to the extent of actual and provable damages arising from the lease relationship. Therefore, if the lessor has no justified claim upon termination of the contract, the deposit must be returned to the tenant.
II. Legal Basis for the Return of the Deposit
Upon termination of the lease agreement, the reasons justifying the retention of the deposit also cease to exist. Therefore, if the tenant has fulfilled all obligations and delivered the leased property in accordance with the contract, the lessor becomes obliged to return the deposit.
The purpose of the deposit is not to provide additional profit to the lessor, but to secure possible damages. Therefore, the lessor may only set off claims from the deposit to the extent of existing and provable receivables.
III. Conditions Required for the Return of the Deposit
In general, the following conditions must be met in order to request the return of the deposit:
• The lease agreement must have ended,
• The leased property must have been completely vacated,
• The keys must have been delivered to the lessor,
• Rent and ancillary expense debts must have been paid,
• The leased property must have been used within ordinary use limits,
• The lessor must not have any justified and provable claim requiring set-off from the deposit.
If these conditions are met, the tenant is entitled to request the return of the deposit.
IV. On What Amount Will the Deposit Be Refunded?
The issue of on which amount the deposit will be refunded has been largely clarified by Supreme Court decisions in recent years.
In long-term lease relationships in particular, returning the deposit paid at the beginning of the lease agreement based on the same nominal value may lead to unfair results. Due to inflation, the purchasing power of money significantly decreases, causing a serious loss of value for the tenant.
According to the established practice of the Supreme Court, the principle of equitable justice must be taken into account in the refund of the deposit. In this context, the ratio of the deposit to the rent must be preserved, and the current rental value at the date of termination of the contract must be taken as the basis when determining the refund amount.
Therefore, in current practice, instead of refunding the nominal deposit amount paid initially, it is accepted that the calculation should be made by preserving the deposit’s ratio to the rent.
The main purpose of this approach is to ensure that the economic balance established between the parties at the beginning of the lease relationship is preserved as much as possible at the end of the contract.
V. Under Which Conditions Is the Deposit Not Refunded?
Although the refund of the deposit is the rule, in some cases the lessor has the right to withhold all or part of the deposit. However, the lessor must prove its claim with concrete evidence.
A. Unpaid Rent Debts
If the tenant has partially or completely failed to pay the rent due until the date of eviction, the lessor may set off these receivables from the deposit.
In practice, set-off from the deposit is frequently seen due to non-payment of rent for the last months.
B. Unpaid Maintenance Fees and Ancillary Expenses
If maintenance fees, common expenses, heating costs, electricity, water, or similar usage expenses for which the tenant is responsible are unpaid, the lessor may cover these claims from the deposit.
However, the lessor must be able to document that such claims actually exist.
C. Damages Caused by Improper Use of the Property
Under the Turkish Code of Obligations, the tenant is obliged to use the leased property with care. Wear and tear resulting from ordinary use is not the tenant’s responsibility.
On the other hand, damages arising from situations such as:
• Broken doors,
• Broken windows,
• Damage to walls beyond normal use,
• Damage to fixed installations,
• Damage to parquet, kitchen or bathroom equipment due to improper use,
may be set off from the deposit.
D. Damages Arising from Breach of Contractual Obligations
If the lessor suffers damage due to the tenant’s breach of contract, set-off from the deposit may also be made.
For example, the deposit may be used to compensate damages arising from unauthorized use of the leased property by third parties or unauthorized alterations contrary to the contract.
E. Failure to Deliver the Keys
Physical vacating of the leased property alone does not indicate termination of the lease relationship. If the keys are not delivered to the lessor, it may be accepted that the tenant’s right of use continues.
Therefore, rent receivables arising until the delivery of the keys may be set off from the deposit.
VI. Is It Possible for the Lessor to Hold the Deposit Indefinitely?
No. It is not legally possible for the lessor to hold the deposit indefinitely.
According to Article 342 of the Turkish Code of Obligations, where the security deposit is placed in a bank, if the lessor does not notify the bank within three months following the termination of the lease agreement that it has filed a lawsuit or initiated enforcement proceedings against the tenant, the bank is obliged to return the security to the tenant.
This regulation aims to prevent the lessor from holding the deposit for a long time without a justified claim.
VII. Burden of Proof
In disputes regarding the return of the deposit, the basic rule is that the lessor must prove the existence of a claim requiring deductions from the deposit.
The lessor must substantiate:
• Rent receivables,
• Maintenance fee receivables,
• Damage arising from improper use,
• Repair costs,
through invoices, expert reports, delivery reports, photographic records, or similar evidence.
Abstract claims are not considered sufficient to justify withholding the deposit.
Conclusion
The deposit is a security ensuring the tenant’s obligations under the contract and is not a source of income for the lessor. Upon termination of the lease agreement and fulfillment of the tenant’s obligations, the return of the deposit is mandatory.
In current Supreme Court practice, the principle of equitable justice is adopted in the refund of the deposit, and the ratio of the deposit to the rent is preserved while taking into account current economic conditions. Therefore, instead of relying solely on the nominal amount initially paid, it is accepted that the economic values at the date of termination of the contract must also be taken into account.
However, if there are unpaid rent debts, maintenance fee receivables, damages arising from improper use, or other damages resulting from contractual breaches, the lessor may set off such amounts from the deposit, provided that these claims are proven with concrete evidence.