Can a landlord refuse to return a security deposit to a tenant because of a scratch on the furniture: what the court says

In Ukraine, a common practice has developed in housing rentals where property owners take a security deposit from tenants, usually equal to one month's rent. This amount serves as a guarantee in case of property damage or other breaches of the contract terms.

The legal relationship between the tenant and the landlord is regulated by the provisions of the Civil Code of Ukraine on lease, in particular Articles 759–786 of the Civil Code of Ukraine. According to Article 759 of the Civil Code, a lease agreement involves the transfer of property for use for a fee for a certain period, and Article 629 of the Civil Code establishes that the contract is binding for the parties. The contract defines the rights and obligations of the parties, the procedure for using the property, grounds for its return, and conditions for final settlements.

After the lease term ends, the tenant is obliged to return the property to the owner. According to Article 785 of the Civil Code of Ukraine, the property must be returned in the condition in which it was received, taking into account normal wear and tear, unless otherwise provided by the contract.

To avoid disputes, in practice, the transfer of property is usually formalized by an acceptance-transfer act, which records its condition at the time of return. This document often becomes key evidence in conflicts between the parties.

If the tenant violates the contract terms, does not pay rent, or does not vacate the property after the lease term ends, the owner may demand termination of the contract and eviction. However, termination of the lease does not automatically mean that the security deposit remains with the owner. If the tenant has fulfilled all contract terms, has no debts, and returned the property in proper condition, the owner must return the security deposit. This is provided for by Article 571 of the Civil Code of Ukraine.

Disputes related to early termination of lease agreements are also common in practice. In such cases, the parties often interpret the termination conditions, notice periods, and grounds for vacating the property differently. Conflicts often arise because one party considers the contract terminated, while the other insists it remains in force. Therefore, disputes over early termination of leases and final settlements, including the return of the security deposit, often become the subject of court proceedings.

Courts' position in housing lease disputes

For example, the Zakarpattia Court of Appeal in case No. 303/8395/23 considered whether a tenant has the right to return an unpaid security deposit paid during the lease. The court established that on April 1, 2023, a lease agreement for a residential house was concluded between the landlord and tenant, under which the tenant received the property for temporary paid use. The contract stipulated that the property is handed over in a habitable condition, and its defects are recorded in the acceptance-transfer act, which is an integral part of the contract.

The parties also defined the procedure for using and maintaining the property, including dividing repair responsibilities: major repairs are the landlord's responsibility, while current repairs due to tenant-caused damage are the tenant's responsibility. The rent was $1,300, and the security deposit was the same amount. The deposit was subject to return after the lease ended, provided there was no property damage or utility debt.

During the case, the court of first instance found that a conflict arose between the parties regarding the use of the property and eviction, which escalated at the end of July 2023. This is confirmed by case materials, including a police officer's report. The court concluded that the landlord's actions effectively indicated unilateral termination of the lease in violation of its terms and Articles 782, 783 of the Civil Code of Ukraine.

It was also established that after the property was returned, the landlord tried to withhold part of the deposit, citing alleged damages and restoration costs. However, these claims were not supported by evidence.

Considering the established circumstances, the court of first instance partially satisfied the claim and ordered the return of the deposit to the tenant, deducting confirmed utility debts. The final amount to be recovered was UAH 48,323.54. The appellate court agreed with these conclusions. As a result, the appeal was dismissed, and the first-instance court's decision remained unchanged.

In particular, the Shevchenkivskyi District Court of Zaporizhzhia in case No. 336/2242/25 issued a default judgment partially satisfying claims for debt recovery, compensation for property and moral damage, and application of consequences for breach of monetary obligations.

The court found that on April 9, 2024, the parties concluded a lease agreement for apartment No. 34, with a monthly rent of UAH 8,000, separate payment for utilities, and a security deposit of UAH 10,000. According to the contract, this deposit was non-refundable in case of early termination initiated by the tenant but refundable only if termination was initiated by the landlord.

During the case, the plaintiff stated that the defendant prematurely ceased using the apartment, left the property without proper handover and keys, and did not pay rent for October and November 2024. The plaintiff also pointed to property damage and significant restoration costs and sought compensation for moral damages.

The court concluded that only the non-payment of rent for October and November 2024, totaling UAH 16,000, was proven. Claims regarding utility payments were not supported by proper evidence, and the alleged repair costs and moral damages were not proven due to lack of sufficient and admissible evidence of the damage amount and causal link between the defendant's actions and the claimed damages.

The court also noted that inflation losses and 3% annual interest could not be recovered due to inconsistencies in calculations and lack of proper justification for the accrual period.

As a result, the court ordered the defendant to pay only UAH 16,000 in rent arrears and UAH 1,211.20 in court fees, denying the rest of the claims.

According to the provisions of the Civil Code of Ukraine and established court practice, the property owner must prove lawful grounds for withholding the security deposit, including the existence of debts, property damage, or other breaches of contract terms by the tenant.

Courts consistently hold that any damages must be supported by proper and admissible evidence. Mere claims of property damage or the need for repairs are insufficient. Important are the lease agreement, acceptance-transfer act, photo documentation of the property's condition, receipts, invoices, and other documents confirming actual expenses or debts.

At the same time, the tenant is not relieved of the obligation to properly fulfill the contract terms. Non-payment of rent, utilities, or early termination contrary to the contract terms may be grounds for withholding the deposit in full or in part.

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