It is difficult for a person to part with the money that was given to him, even if only temporarily: such is the psychology of Homo sapiens. Very often, such mental anguish overtakes citizens who have received a security deposit under a particular agreement.
A security payment is a guarantee payment that is subject to return in cases where the conditions for its offset specified in the contract have not been met (this payment is also called a guarantee or insurance payment). It is most often used in lease agreements, although it may also be present in other transactions for the provision of services or the supply of goods.
For example, if the tenant did not break or damage anything, if he paid in good faith for the use of the premises, then the landlord is obliged to pay a guarantee payment. But many people don’t want to do this! The problem is aggravated by the fact that the law allows you to dispose of the security amount at your personal discretion. And sometimes there is nothing to return... There is a feeling that “I took someone else’s money for a while, but I’m giving mine away forever.”
To avoid this unpleasant procedure, unscrupulous contractors use many tricks. You should carefully study the contract you sign, present your demands legally and do not forget that an experienced lawyer greatly increases the chances of getting your money back in the most difficult situations.
Security payment and its regulation
One of the ways to ensure the obligations of a party to civil law relations is the Civil Code (hereinafter referred to as the Civil Code of the Russian Federation) in paragraph 1 of Art.
329 calls security deposit. The direct definition of this concept is given by clause 1 of Art. 381.1 of the Civil Code, according to which a security payment is a sum of money determined by the parties to a transaction, which one of the parties pays to the other as security for any obligation under the transaction. Based on Art. 381.2 of the Civil Code of the Russian Federation, the rules on security payments are equally applied in cases where the subject of security is not cash, but securities (including shares and bonds) or things subject to individualization. In Art. 381.2 of the Civil Code, amendments have been made that come into force on June 1, 2018, according to which the regulation of issues of security payment, the subject of which are securities, can also be carried out by specialized legislation on securities.
In addition, issues relating to the security payment and its return have repeatedly been the subject of proceedings in arbitration courts and the Supreme Court of the Russian Federation. In this regard, it is necessary to consider this topic taking into account court decisions that have entered into legal force.
It is also important to know that the regulation of this method of securing an obligation and its return can be carried out by the parties to the transaction independently. In this case, the participants, by mutual agreement, establish the amount, circumstances under which the payment is non-refundable, the return procedure, etc.
Concepts and conditions of a security payment agreement, sample agreement
The legislator said nothing about the form, concept and conditions of the security payment agreement. These points will most likely be clarified by the courts.
However, based on the current Russian practice of document management, we believe that such an agreement can be concluded in the form of a separate document, which:
- drawn up in writing if the main obligation must be concluded in writing by virtue of law;
- contains a reference to the main agreement or the obligation itself and the conditions under which the creditor can satisfy its interests at the expense of the contributed funds;
- includes information on the amount of the security payment, the possibility of additional payment and partial or complete withdrawal of funds before the debtor fulfills his obligations;
- determines the possibility (or lack thereof) of accruing interest on the amount of the security deposit;
- establishes a validity period equal to the validity period of the main contract.
Any lease or purchase and sale agreement, or any other agreement, may contain a provision for the payment of a security deposit.
An example of such an agreement can be found here: Sample agreement with a security deposit.
We suggest reading in detail about the various types of security payments under a lease agreement in the guide to agreements from ConsultantPlus. You can log in to the system after registering for a free 2-day access.
In what cases can a return be made?
Due to the requirements of paragraph 2 of Art. 381.1 of the Civil Code of the Russian Federation, the return of the security payment is carried out by the party in whose favor it was made, if the circumstances with the occurrence of which the parties to the transaction associated the need for security measures did not actually occur. Thus, if the parties to the agreement stipulated that the security payment is returned to the party that made it within 5 calendar days after full fulfillment of their obligations, the return is made upon full fulfillment of all obligations by the party to the transaction (delivery of goods, performance of work, etc.).
You can find more complete information on the topic in ConsultantPlus. Free trial access to the system for 2 days.
Also, by virtue of this rule, the amount of security is subject to return if the security obligation itself has been terminated. It does not matter how this happened - by agreement of the parties or upon the occurrence of certain circumstances stipulated by the parties in the contract or agreement.
This situation may arise if the parties voluntarily, i.e., on the basis of their will, sign an additional agreement to the contract, which excludes the conditions for this method of security or recognizes them as invalid. Also, the obligation may be terminated due to the fulfillment of the conditions stipulated by the contract (after the first delivery has been made without violating the deadlines, the first payment under the contract has been made on time, etc.).
At the same time, the legal norm in question is dispositive and presupposes the possibility of establishing other grounds and procedures for the return of the security deposit if the parties have agreed on this in writing. Moreover, the parties may additionally provide for cases when one of the parties is obliged to make a partial return of the security deposited in its favor or increase the amount (clause 3 of Article 381.1 of the Civil Code).
Article 381.1 of the Civil Code of the Russian Federation. Security payment (current version)
The use of security payments within the framework of certain civil obligations is often due to a situation where counterparties do not fully trust each other. A participant in a contractual obligation, for example, a contractor under a construction contract, often cannot reliably confirm the real level of his professionalism or integrity (the ability to properly perform work) or solvency (if necessary, bear responsibility to the customer in case of improper performance of the obligation). Making a security payment can remove or reduce the corresponding risk of the counterparty who is ready to take the first step: provide raw materials, materials for performing work, expensive equipment for its installation, etc.
4. A security payment should be distinguished from other methods of ensuring the fulfillment of an obligation and other interim measures.
A security payment differs from a pledge in that the object of the security payment is homogeneous to the object of the secured obligation, and unlike the object of the pledge, it can be paid only in a monetary amount or in the form of shares, bonds, other securities or things defined by generic characteristics that are subject to transfer under the secured obligation. Accordingly, the collateral regime, which presupposes the procedure of foreclosure on the pledged object to satisfy the requirements of the pledge holder, is simply not applicable here.
A security deposit should also be distinguished from a deposit. It, like the deposit, performs a payment function, since it is deposited towards future payments. But the deposit is given by the party with whom payments are due under the contract: the customer, the tenant, the buyer, etc. The amounts of money are paid by her in advance in favor of such another person who is obliged to perform certain actions for her, such as: transfer property, perform work, provide a service etc. The security payment is made not for goods, work or services, but to cover only the possible, probable, potential monetary obligations of the person who made such a payment. The likelihood that the very basis for payment will arise prevents the recognition of such funds as a deposit. In addition, the security function of the deposit is characterized by a bilateral nature (if the party that received the deposit is responsible for failure to fulfill the contract, it is obliged to pay the other party double the amount of the deposit - clause 2 of Article 381 of the Civil Code of the Russian Federation). A security payment ensures only the obligations of the party that makes it.
A security payment also differs from an advance payment, although it is also included in future payments (payment function). However, unlike a security payment, an advance does not perform a security function. It is paid by one person in favor of another person who (as when making a deposit) is obliged to perform certain actions for him, such as: transfer property, perform work, provide a service, etc. Moreover, regardless of which party is responsible for failure to fulfill an obligation, the party that issued the advance has the right to demand its return in all cases of non-fulfillment of the contract. The security payment, as already noted, is made not for goods, work or services, but to cover only the possible, probable monetary obligations of the person who made such a payment. The probabilistic nature of the occurrence of the very basis for payment, including the obligation to compensate for losses or pay a penalty in the event of a breach of contract, as in the case of a deposit, prevents the recognition of such funds as an advance.
A security payment should not be identified with such a term of the contract as a guarantee lien. This condition is often used in contracts of purchase and sale, paid services or contract. According to the guarantee retention clause, the party to the contract (buyer, customer), obligated to pay a certain amount of money for certain actions performed for it by the counterparty, withholds (does not pay, but retains) from the amounts due to the creditor a predetermined part of the payment for goods, work or services. The retained part of the fee is paid after a certain period, for example, after the end of the warranty period for the product or the result of the work performed. Its further withholding is permissible only if, within a specified period, defects in the product, the result of work, etc. are identified. In this case, the buyer’s (customer’s) expenses for their elimination can be reimbursed from the amounts due to the seller (contractor), i.e. due to the amounts of the guarantee retention. In other words, the claims of one party to the contract for compensation for losses in connection with improper fulfillment of an obligation by the counterparty will be offset against the claim of the other party for payment for goods, results of work or services rendered. Unlike the amount of the guarantee lien, the security payment, firstly, does not represent part of the payment for certain actions performed by the counterparty; its payment ensures that only possible, probable, potential monetary obligations of the person who made such payment are covered; secondly, as has been repeatedly noted, it is entered in advance, i.e. before the occurrence of circumstances provided for in the contract as the basis for payment to the creditor, and is not withheld from the amounts due to the creditor.
5. The fate of the security payment depends on the occurrence or non-occurrence of a monetary obligation, secured in advance by its payment by one of the parties to the agreement.
According to para. 2 points 1 art. 381.1 of the Civil Code of the Russian Federation, the security payment performs a payment function, since upon the occurrence of circumstances provided for by the contract, the amount of the security payment is “counted” towards the fulfillment of the corresponding obligation by the party who received the security payment. This party, being a creditor under an obligation secured in advance, thereby exercises its right to count against the fulfillment of the corresponding obligation the amount of the security payment due to it in an amount equal to the property claims. The creditor does not need to go to court for this. The amount exceeding the amount of monetary claims due to the creditor is subject to return to the counterparty. See: paragraph 29 of the Review of judicial practice of application of the legislation of the Russian Federation on the contract system in the field of procurement of goods, works, services to meet state and municipal needs.
The Code does not define the procedure for “counting” monetary amounts. At the same time, various court decisions appear in judicial practice, which both connect and do not connect the rules for “counting off” the security deposit with the rules of Art. 410 of the Civil Code of the Russian Federation on the termination of an obligation by offsetting a counterclaim of a similar nature. Thus, according to the Resolution of the Nineteenth Arbitration Court of Appeal dated July 25, 2021 N 19AP-2467/2016 in case N A14-17501/2015, the court, using the example of a security payment made by the contractor in favor of the customer, decided to return the security payment to the contractor who violated the deadlines works, since the court was not presented with evidence of an application to the contractor to offset similar counterclaims. See also: Resolution of the Fifth Arbitration Court of Appeal dated April 21, 2021 No. 05AP-2028/2016 in case No. A51-27586/2015.
There are also directly opposite decisions, according to which the courts consider it erroneous to correlate the term “counted” with the term “offset” provided for in Art. 410 of the Civil Code of the Russian Federation (see, for example, Resolution of the Thirteenth Arbitration Court of Appeal dated June 3, 2021 N 13AP-5839/2016 in case N A26-10137/2015. In accordance with this position of the courts, when making a security payment, the creditor should not send any notifications to the counterparty who provided the security payment, prove the amount of losses, present claims to the debtor for compensation for losses or penalties, etc.
6. According to paragraph 2 of Art. 381 of the Civil Code of the Russian Federation, if a monetary obligation secured in advance arose, but before the implementation of the “offset” was terminated (for example, the customer under a construction contract refused to fulfill the contract on the basis of Article 717 of the Civil Code of the Russian Federation not due to circumstances indicating unlawful behavior of the contractor), equally, if during the period for which the security payment is provided, the circumstances that are associated with the emergence of the secured monetary obligation do not occur, the received security payment is subject to return, unless otherwise provided by agreement of the parties. See: Ruling of the Supreme Court of the Russian Federation of March 28, 2021 N 310-ES18-1605. The text of the Definition has not been officially published. Entry date 02/24/2019. A different understanding would result in unjust enrichment of the party receiving the security payment.
7. According to paragraph 3 of Art. 381.1 of the Civil Code of the Russian Federation “the agreement may provide for the obligation of the relevant party” to make up for the security payment or partially return it upon the occurrence of certain circumstances. It seems that the establishment of such a rule should be interpreted as if a proportional increase or partial return of the security payment is possible only by agreement of the parties, formalized by an agreement or an additional agreement to amend it. Thus, under a construction contract, the contractor provided the customer with a security payment to secure the obligation to compensate for losses that may be caused to the customer during the installation of equipment owned by the customer. During the execution of the contract, the installed equipment was damaged and the customer, as a creditor, exercised its right to count the security payment or part thereof against damages for the resulting secured obligation. At the same time, if the work continues and the contract contains a condition on the reimbursable nature of the security payment, then the customer has the right to demand a proportional payment before making the security payment in order to restore the amount of the security in case of repeated occurrence of the relevant circumstances. On the contrary, if during the execution of the contract the parties reach an agreement to reduce the volume of work performed and the contract contains a provision for the partial return of the security payment upon the occurrence of this circumstance, then the contractor has the right to demand a reduction in the amount of the security payment and the return of part of it.
8. Interest established by Art. 317 of the Civil Code of the Russian Federation are payments for the use of funds. Within the meaning of paragraph 4 of Art. 381.1 of the Civil Code of the Russian Federation, unless otherwise provided by the agreement, the accrual of said interest on the amount of the security payment is not allowed. Thus, the Code emphasizes that, as a general rule, the person who received the security payment is not charged a fee for its acquisition. It appears that the parties take into account the period of use of the sums of money received as a security deposit in the price of the contract. At the same time, in the absence of grounds for “counting off” the security payment and its non-repayment by the relevant party, the amount of the debt from the moment of delay in its return is subject to accrual as interest established by clause 1 of Art. 317.1 of the Civil Code of the Russian Federation, and interest, which is a measure of civil liability, established by Art. 395 of the Civil Code of the Russian Federation. See: paragraph 33 of the Resolution of the Plenum of the Supreme Court of the Russian Federation of November 22, 2021 N 54 “On some issues of application of the general provisions of the Civil Code of the Russian Federation on obligations and their execution.”
Letter for return of security deposit (form, contents, sample)
In the absence of a clear procedure for requesting a security payment and its return, the interested party must first send a letter to its counterparty requesting the return of the payment. This document does not have a set form (unless it is established by the contract), therefore it is drawn up in free form.
According to business customs, such a letter should contain the following information:
Subscribe to our newsletter
Yandex.Zen VKontakte Telegram
- the name of the counterparty to the transaction, its individual characteristics and contact details (in accordance with the details specified in the agreement);
- details of the party requesting the return of security for the fulfillment of its obligation;
- details of documents confirming the transfer of a sum of money to the settlement account of the second party to the transaction or the deposit of security in favor of the counterparty in another way (indicating the date of payment, document number, etc.);
- the amount of money to be returned;
- an indication of the obligation to secure which the amount required for return was contributed, as well as details of the agreement within the framework of which it was secured;
- the reasons why the security payment is subject to return (fair performance of the obligation, termination of the security obligation);
- details for return (including in the form of a reference to the details specified in the contract).
Such a letter is drawn up on the organization’s letterhead, certified by the signature of the director of the company or other authorized person, as well as a seal (if necessary and available).
A sample letter for the return of a security deposit can be downloaded from our website. It can be used as a template when creating your own version.
Specifics
It is necessary to clearly understand the properties that a security deposit has. The Civil Code of the Russian Federation does not consider this instrument as a “fine”, the amount of which is lost by the debtor if the terms of the transaction are violated. It is used to cover property losses and debts. This follows from the direct interpretation of Art. 381.1, clause 1. The rule indicates that the security payment is a guarantor of the fulfillment of contractual terms and is included in the repayment of debt, but is not collected in excess of the established amount. If we consider this instrument as a measure of responsibility, then it should be taken into account that it will be compensatory in nature. In other words, its application is aimed at restoring the position of the creditor that existed before the violation of his interests. Accordingly, a security payment cannot act as a means of enrichment.
Procedure for returning a security deposit
Termination of the contract or conscientious fulfillment by a party of its obligations under the transaction entails the obligation of the other party to return the amount of money (or securities or other property). In this case, the implementation of the return is subject to a certain procedure, which is ideally determined by the parties in advance and is enshrined in writing in the relevant section of the contract or agreement on ensuring its execution. If the procedure is not defined or the obligated party does not make a return, the interested counterparty must send a letter of return (or a claim, depending on the specifics of the specific situation).
The further procedure is not specified at the legislative level; there is only a certain practice of civil law. After receiving a letter (claim), if there are sufficient grounds, the recipient is obliged to return the security payment within the period specified by the sender, or otherwise, if established by law. The refund is carried out according to the details specified in the letter, or those specified in the contract or agreement on the parties securing their obligations under the contract.
How is VAT calculated and posted on a security deposit?
At present, the issue of calculation and payment of VAT remains unresolved. When should this be done: immediately upon receipt of the security payment or only after its actual use? The position of the Ministry of Finance and judicial practice in this case provide a difficult interpretation.
There is an opinion that a security payment is included in the tax base if it is received within the framework of an agreement (ensures the fulfillment of the obligations of one of the parties) and is counted against payment under the agreement (Letter of the Ministry of Finance of Russia dated July 3, 2018 No. 03-07-11/45889) .
As for the security transferred for the conclusion of a future agreement (formulated by a preliminary agreement), such payment is not a payment under the main agreement, for example, a lease. Therefore, even if it is taken into account as payment, it does not need to be included in the VAT tax base. (Letter of the Ministry of Finance of Russia dated December 28, 2018 No. 03-07-11/95829): that regardless
If the creditor who received the security payment decided to immediately calculate VAT, he calculates it as follows: Dt 76 Kt 68.
This is done if, for example, the lease agreement stipulates that the amount of the security payment in the last month of the lease is used to close the contract (letter of the Ministry of Finance of Russia dated November 3, 2015 No. 03-03-06/2/63360).
Then, after transferring funds from the security payment account to the next payment account in the last period of the contract, a tax deduction should be made, since VAT on the next payment has already been paid (see above).
The tax deduction is carried out as follows: Dt 68 Kt 76 - for the amount of the originally accrued VAT.
Possible disputes
After the end of the rental agreement, the security deposit may be counted as the last month's rent or returned to the user. However, at this stage the latter may experience certain difficulties. If the owner does not fulfill his obligations in good faith, it will be extremely difficult to get the funds back. If the tenant regularly complies with the terms of the deal, then in case of refusal, he can go to court. The practice in cases of this category is very ambiguous.
Most courts take the position that the right to foreclose on a security deposit must be established by agreement between the parties. If it is not provided, the actions of the owner paying off the last installment will be considered illegal. In addition, the courts indicate that sending a notification to the user about the foreclosure of payment is mandatory. However, this rule is not established in legislation. However, by notifying the counterparty, the transaction participant demonstrates his good faith. Accordingly, proof of notice may help resolve the case.
How to apply?
If the owner requires payment of the security amount, the transfer of funds must be documented. A separate agreement may be concluded between the parties to the transaction , which must specify the amount, date, purpose of the money and conditions for the return of funds.
Another option is a receipt. However, this type of document only records the acceptance and transfer of money, but does not establish the conditions for their return and use in the event of damage to property. The best option for registering the insurance amount is to include data about it in the rental agreement as a separate clause.
What it is?
What is a deposit when renting, renting and renting out an apartment and what does it mean? A rental security deposit is the amount that the owner takes from the tenant to ensure the safety of the property located in the apartment. It is usually equal to the monthly rent and is transferred to the landlord on the day the lease agreement is signed and the first month's rent is transferred.
This amount is returned to the employer under the following conditions:
- if the tenant is evicted and the tenancy agreement is terminated;
- if at the time of eviction the apartment and property are transferred to the owner in their original form.
REFERENCE : The deposit amount is not refundable if, during inspection of the apartment, the owner reveals damage or shortage of property. In this case, the money will be used to compensate for the damage.
