When a lease ends, many issues are recalculated all over again.
Utilities, keys, cleaning conditions—eventually, everything circles back to the same question: the security deposit.
Tenants ask:
“The property has been returned. When will the deposit be refunded?”
Landlords wonder:
“The equipment is damaged like this—can nothing be deducted?”
Others ask directly:
“If the rent hasn’t been fully paid, can it be deducted from the deposit first?”
Let’s clarify one thing upfront:
A security deposit is not untouchable—but it is not something a landlord can deduct at will.
The boundary is not based on feelings. It is defined by law.
What Does the Law Say?
Rental Housing Market Development and Regulation Act, Article 3, Paragraph 13:
“Security deposit: money paid in advance by the tenant to secure compensation for damage to the rental housing and responsibility for handling leftover belongings.”
✨ Plain explanation: The law clearly limits the purpose of a security deposit to damage compensation and responsibility for leftover items.
In other words, the deposit exists to cover damage to the property or equipment, and the costs of handling items left behind after the tenant vacates.
The law does not define a security deposit as prepaid rent. A deposit is not reserved rent.
⚖️ Legal Source: Rental Housing Market Development and Regulation Act Article 3 – Law.moj.gov.tw
Rental Housing Market Development and Regulation Act, Article 7:
“1. The amount of a security deposit may not exceed two months’ total rent.
2. Upon termination of the lease, return of the property, and settlement of obligations arising from the lease, the landlord shall return the deposit or the remaining balance after offsetting debts.”
✨ Plain explanation: This article clearly defines both the upper limit and the timing of deposit return.
A deposit may not exceed two months’ rent, and it does not permanently belong to the landlord.
Once the lease ends, the property is returned, and all lease-related obligations are settled, the landlord must return the deposit.
If lawful deductions apply, only the remaining balance may be retained temporarily.
A security deposit is held in custody—it is not landlord income.
⚖️ Legal Source: Rental Housing Market Development and Regulation Act Article 7 – Law.moj.gov.tw
Land Act Article 100, Subparagraph 3:
“When a tenant owes rent exceeding two months, except where the security deposit offsets the amount.”
✨ Plain explanation: This provision was frequently cited under the older legal framework to justify offsetting rent with a deposit.
However, after the implementation of the Rental Housing Act, the legal nature of security deposits has shifted.
In practice, this article is no longer the primary basis for offsetting rent with a deposit during an ongoing lease.
⚖️ Legal Source: Land Act Article 100 – Law.moj.gov.tw
Why Is Deposit Refund Such a Common Dispute?
In real rental practice, deposits (formerly called “rent deposits”) are often treated as a catch-all fund:
- Rent unpaid? Deduct from the deposit.
- Scratches on the wall? Deduct from the deposit.
- Disagreement between parties? The deposit gets withheld anyway.
As a result, disputes at move-out almost always focus on one issue:
Should the deposit be returned?
This is why deposit disputes account for a disproportionately high share of rental conflicts.
⚠️ It also explains why documentation matters:
Photographs and condition checklists at move-in, and a proper inspection at move-out, are essential. Without records, responsibility becomes difficult to determine.
One Critical Concept to Understand
Modern law uses the term “security deposit,” not “rent deposit.”
Security deposit ≠ prepaid rent.
In the past, some court decisions treated rent deposits as security for rent obligations and did not require return before the lease ended.
The current legal framework clearly draws the line:
A security deposit exists to address damage and leftover items, not to guarantee rent payment.
Can a Security Deposit Be Used to Offset Rent?
The answer depends on timing.
❌ During an ongoing lease:
A security deposit cannot be used to offset rent.
The key question is simple:
Has the lease already ended?
As long as the lease remains in effect, neither landlord nor tenant may lawfully apply the deposit to current rent.
✅ After the lease has terminated and the property has been returned:
If unpaid rent, utilities, management fees, or other contractual debts remain, the landlord may lawfully offset those amounts against the deposit.
However, after offsetting, any remaining balance must still be returned to the tenant.
What Can a Security Deposit Be Deducted For?
✅ Lawful deductions
- Damage to the property or equipment beyond normal wear and tear
- Damage caused by gross negligence (e.g., fire)
- Large amounts of trash or abandoned items left after move-out
- Disposal or storage fees paid by the landlord
- Unpaid rent or contractual fees remaining after lease termination
❌ Unlawful deductions
- Normal wear and tear
- Lack of inspection records or evidence
- Attempting to offset rent while the lease is still ongoing
- Deductions based solely on the landlord’s subjective dissatisfaction
What If the Landlord Refuses to Return the Deposit?
Many tenants choose to endure the loss because litigation feels time-consuming.
However, when statutory conditions for return are met, tenants may consider filing for a payment order, a relatively simple and cost-effective legal procedure to recover the deposit.
🧜♂️ Related Read: What’s the Difference Between a Security Deposit and a Reservation Deposit in Taiwan?
🌬️Related Read: Rental Handover Matters! How to Document Property Conditions and Avoid Disputes in Taiwan
🌊Related Read: What Is the Move-Out Inspection Process in Taiwan?
🐙 Related Read: What Does “Return in Original Condition” Really Mean in Taiwan?
Final Takeaway
A security deposit is neither a landlord’s bonus nor prepaid rent.
It is a legally restricted sum governed by clear rules.
During the lease, it cannot be used to offset rent.
Only after lease termination and property return does lawful offsetting become relevant.
When deposits are placed back into their proper legal role, many disputes become unnecessary.
Clear rules protect landlords from risk—and safeguard tenants’ rights.
