How to successfully collect a deposit from a tenant? Our 3 iron rules!

A security deposit on a long-term rental is not mandatory, but is commonly used by landlords in Poland as a basic security for any kind of claims. What’s more, it is one of the most effective safeguards, as the money to cover any damages and unpaid rent goes directly to the landlord. For this reason, it is crucial to establish its amount correctly and successfully collect it. Based on our years of experience as a property management company, we have developed 3 iron rules that we absolutely adhere to every time we collect a security deposit.

1. The security deposit should be established and specified in the rental agreement.

Setting its amount after signing the agreement is possible only with the tenant’s consent. Therefore, it is worth remembering to raise the subject of the deposit at the very beginning of negotiations with the tenant, and then to add a relevant clause in the contract.

2. In each case, the amount of the deposit should be adapted individually to the tenant.

Too low security deposit will not secure claims, too high will put off potential tenants. The Polish Tenancy Act sets the maximum deposit at 12 times the rent for ordinary rentals and 6 times for occasional and institutional contracts (specific form of rental contract that requires extra documents to be signed in the front of the notary). Usually one month’s rent (sometimes plus bills/charges) is charged as a deposit, but it is worthwhile to analyse the risk posed by a particular tenant, such as if they are a foreigner or a person with a pet, and modify/increase the amount in each agreement.

3. By far the best practice is to pay the deposit in full before the property is handed over to the tenant.

The landlord is free to determine how the tenant is to pay the deposit. It can be paid to the bank account or in cash. We highly recommend against agreeing to installment payments. In our experience, deposit paid pro rata is a trouble!