In rental agreements, a security deposit is almost always part of the deal. Tenants usually pay a deposit before moving in to cover potential situations such as unpaid rent, outstanding utility bills, damage to fixtures, or contract violations. But how much can be charged? The law sets a clear limit.
🧙♀️ Related Read: What’s the Difference Between a Security Deposit and a Reservation Deposit in Taiwan?
Residential Leases: Maximum Two Months’ Rent
If the rental property is for residential use — such as a full apartment, studio, or shared room — the security deposit cannot exceed two months’ rent. This is a mandatory rule set out in the Rental Housing Market Development and Regulation Act (“Rental Act”).
Article 7 of the Rental Act states:
- The amount of the security deposit shall not exceed the total rent for two months.
- Upon termination of the lease, once the tenant has returned the premises and settled all debts arising from the lease, the landlord shall return the deposit or any remaining amount after deducting the debts.
This requirement is also written into the standardized rental agreement announced by the Ministry of the Interior, and must be followed whether the government’s template or a private lease is used.
🕯️ Related Read: What Are the Required and Prohibited Lease Terms in Taiwan?
🔮 Related Read: What Are Mandatory and Prohibited Clauses in Taiwan?
Handling Over-Collected Deposits
If the deposit exceeds the two-month limit, the clause is invalid even if both parties agreed to it. The tenant may claim the excess amount as rent payment. For example, if three months’ rent was collected as a deposit, the extra month can be counted toward the next rental payment.
If the tenant files a complaint with the competent authority, the landlord may face a fine ranging from NT$30,000 to NT$300,000. For repeated violations, the fine can rise to NT$50,000 to NT$500,000.
Commercial Leases: No Deposit Cap
If the property is for commercial use — such as a shop, office, warehouse, or factory — the deposit cap under the Rental Act does not apply. In such cases, the deposit amount can be freely negotiated between the parties.
Court rulings have generally supported this principle of contractual freedom, holding that commercial use relates to property and business interests rather than housing rights, so the law does not restrict deposit amounts.
Mixed-Use Properties: Determined by Actual Use
When a property is used for both residential and commercial purposes, whether the deposit cap applies depends on the actual use.
Some government agencies take the view that any residential use triggers the two-month deposit limit. However, courts have also ruled that if the primary use is clearly commercial — for example, in a busy business district, with large floor space and visible signage — the property is not considered a residential lease and the cap does not apply.
In practice, courts look at factors such as location, size, rental price, and business characteristics to determine the primary use.
When the Deposit Should Be Returned
A security deposit is a form of guarantee, not income for the landlord. Once the lease ends, the tenant returns the property, and all obligations such as rent, utilities, and repair costs are settled, the landlord must return the deposit or the remaining balance after lawful deductions.
Without valid reasons, withholding or delaying the return of the deposit may lead to civil disputes.
Conclusion
A security deposit plays a protective role in rental relationships, but for residential leases, the amount is legally capped at two months’ rent; commercial leases are not subject to this limit. For mixed-use properties, whether the cap applies depends on the primary use. Whether you are the landlord or the tenant, both parties should understand the relevant rules — landlords can avoid breaking the law, and tenants can protect their rights too!
