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Guide to Caution Money Know What It Is Used For

Whether you live in a rented apartment or rent out a flat yourself, caution money or deposit are terms you could have already heard of. Yet there can be things you may not be aware of, which is especially true if you don’t speak Czech and have no knowledge of the Czech laws where the caution money is defined. If you want to offer your apartment for rent, the caution money is a friend that will protect you from irresponsible tenants. But how do you as the owner of the apartment use it in accordance with Czech laws? And you tenants, do you know what your landlord can use it for? How can you prevent losing certain amounts of the caution money when leaving the apartment?

 

What is Caution Money?

Generally, the term is defined as “an amount of money that someone has to pay when they rent property, use a service, etc. which will not be returned if they damage something or owe money at the end of their contract”.* For the owner of the property that is being rented it is therefore a way of making sure the apartment will remain in a good condition for next tenants.

This term is also defined in the Czech Civil Code (“Občanský zákoník” in Czech) which, for example, regulates its amount and use. This is very important for both sides; in case they happen to sign a contract that includes something illegal that harms them as a tenant, the Civil Code and what it contains will help them, should they sue the lessor. After all, this is how laws work – they protect people from the actions of others that could potentially harm them in some way. In general, the law protects the less favorable side which is, in this case, the tenant. Why if the caution money is supposed to protect the landlord? That’s because it’s the landlord who can use the money given to them by their tenants, whereas the tenant may not be aware of what it’s used for.

The Czech Civil Code also doesn’t cover the sublease agreement which is why this type of agreement is not covered in this article either.

The Civil Code, for example, says that the caution money may not exceed three times the monthly rent. The amount should be specified in the lease agreement. This is, however, something not everyone may be aware of. In case something like this happens and the tenant only finds out after signing the contract and paying the lessor, they can demand that the sum of caution money be in accordance with this law. If the lessor refuses to do so, they can then sue them. The only thing that one has to remember, should law proceedings happen, is the so-called limitation period.

What is the usual amount of caution money that the tenant has to pay? In most cases, it is the size of one monthly rent. Either way, it is always better to read the lease agreement carefully, make sure that you understand everything that is written there and that it doesn’t contain anything illegal. Preventing complications from occurring is always better than having to solve them later.

 

 

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What Can It Be Used For?

The Civil code regulates many things but what exactly the caution money can be used for, is defined only vaguely. After all, this is something that should be defined in the lease agreement itself. But as mentioned in the previous paragraph, caution money acts as a sort of safeguard should the tenant cause some damage to the rented apartment or its equipment. If something like this indeed happens, a certain amount of the caution money will be taken to cover the damage, the rest will be returned to the tenant. The caution money/ deposit is usually returned to the tenant after the lease agreement expires, and they are about to move out. The amount, of course, depends on the severity of the damage – if the damage is very severe, there is a chance the whole of the caution money will be taken to cover the damage. The date of the caution money being returned to the tenant should be, once again, defined in the lease agreement. If nothing is damaged during the period the tenant spends in the apartment, the caution money is to be returned to the tenant once the lease agreement expires (unless something else is established in the lease agreement) – usually one month after the handover of the apartment back to its owner.

However, it doesn’t always have to be this case – the caution money can be used to cover damage and repairs whenever it is needed. For example, when the apartment or some of its equipment needs to be repaired immediately. There is only one rule that has to be followed in such a case – the amount of money that was taken from the deposit must be then restored back to its original amount. 

The caution money can be, theoretically, also used to cover the rent if the tenant isn’t able to pay it that month for whatever reason. On the other hand, this is not particularly recommended since the lessor wouldn’t be very happy about it – there is no guarantee nothing will be damaged and won’t need to be immediately repaired which is the main purpose of the caution money. Should you find yourself in such a situation, either as the tenant or the lessor, remember that the amount of the caution money has to be restored in this case as well.

Either way, if you are the one who owns the apartment, it is better to use the caution money as little as possible and only use a small amount of it. If you are the tenant, make sure not to cause any damage to the flat or its equipment so the landlord doesn’t have to use it before you’re about to move out.

 

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Useful Tips for Tenants and Landlords

Whether you are a tenant, landlord or neither (at the moment), there are some useful tips everyone should be aware of. It is, for example, recommended that the tenant checks the apartment for any defect and reports them to the landlord until the 14th day from moving in. While this is not specifically stipulated in the Civil Code, it is good to establish this in the lease agreement because it is beneficial for both sides. 

If you as a tenant find any defects or damage you should take photos of it and send (or show) them to the landlord since these photos can serve as evidence. That doesn’t mean, of course, that the landlord would try to blame you as the current tenant for something you are not responsible for. Instead, they may be just unaware of some damage caused by the previous tenant. The sooner you report any damage you discover in the apartment, the better. If you report it after several weeks, months or even just before moving out the landlord probably won’t believe you that the damage was not, in fact, caused by you but the previous tenant.

Landlords should also take photos of the apartment just before their new tenant moves in so they can tell something was damaged. Is the expensive wooden table in the kitchen scratched, for example, but the tenant claims it was not their doing? Then there is nothing easier than to check the photos taken just before they moved in and compare them to the current state of the furniture.

For tenants, it is also recommended to make sure the apartment is completely clean when they’re moving in and then moving out. This way the tenant can avoid possible misunderstandings with the landlord who may take a certain amount of the caution money to be used on cleaning. It is also considerate of the next tenant who would have to deal with the fouled apartment. Think of it this way – nobody wants to move into an apartment just to find out the previous tenants left some mess there and nobody took care of it.

One of the more pressing problems that tenants can experience is their landlord refusing to return the caution money even if there is nothing damaged in the apartment. What should one do in this situation? Since there is a chance the landlord just forgot about it, the tenant should try to inform them about it first. If the landlord claims the money had to be used to cover some damage you caused, the tenant has the right to see the documents that would prove it was indeed used for this purpose. If the landlord refuses to do so, the tenant can warn the landlord that they will contact a lawyer. If the landlord then still refuses to cooperate with the tenant, they can contact the lawyer and discuss this issue with them. The lawyer will then be able to find a solution depending on the situation. It’s always necessary to listen to what the lawyer has to say about this rather than act on your own, should you find yourself in such a situation.

And what problems can the landlords face? Usually the are asked to cover damages the tenant is claiming not to be responsible for. This is the reason why every damage the tenant finds in the apartment after moving in should be reported to the landlord immediately. And also the reason for the landlord to take photos of the apartment when their new tenant is moving in. These photos can be later used as a proof, should the tenant cause some damage they would not want to admit to be responsible for.

Still, whether you are a tenant or a landlord, it is better to always take some precautions and make sure you take good care of the apartment you rented (if you are the tenant, that is). You know how the saying goes: it’s better to be safe than sorry.

*Cambridge Dictionary

Anna Minjaríková Foreigners – relocation agency based in Prague, Brno and other three Czech cities