With regard to security deposits and restoration of property to its original condition, the Civil Code revisions that came into effect in April 2020 have clarified the concepts that have been dealt with in case law and practice up until now. What is important for the landlord is not whether or not to return the security deposit, but on what basis, to what extent, and how to explain the settlement when moving out.
In rental management, even a small mistake in settlement payments can seriously damage trust. That is why it is necessary not only to memorize the revision of the Civil Code as legal knowledge, but also to use it in conjunction with contracts, explanations at the time of move-in, photographic records, and payment statements.
Key points of this article
- The Civil Code was revised to clarify the definition of security deposit, return period, and scope of obligation to restore the property to its original condition.
- As a general rule, normal wear and tear and deterioration over time are not included in the tenant's obligation to restore the property to its original condition.
- Landlords need to review the way they write special agreements, provide explanations when moving in, and organize evidence when moving out.
- When it comes to security deposit settlement, it is important not only to be able to make a claim, but also to be transparent so that you can explain it to the tenant.
- Managing restoration to original condition, duty of care, and return of security deposit separately will make it easier to prevent problems.
What has changed with the revision of the Civil Code regarding security deposits and restoration to original condition?
Not everything about rental practices has changed with the revision of the Civil Code. The major change is that the concepts of security deposits and restoration, which had previously been organized in case law and Ministry of Land, Infrastructure, Transport and Tourism guidelines, have been clearly placed in the provisions of the Civil Code.
In the real estate management field, even before the revision, the following practices were widely practiced: As a general rule, tenants are not responsible for normal wear and tear,'' andsecurity deposits are returned after deducting unpaid rent and restoration costs.'' The revision of the Civil Code did not create new rules that ignored actual practice, but rather made ambiguous areas easier to explain legally.
The practical meaning for landlords is that it is now difficult to say ``this is what we've always done'' when paying for a move-out. When a tenant asks you for your reasons, you will be asked if you can provide the contract, confirmation documents at the time of move-in, photos at the time of move-out, estimate, and payment details.
In other words, the Civil Code amendment is not a system that unilaterally increases the burden on landlords. In fact, I believe that the amendments have made it easier for landlords who have more transparent management to explain their issues.
What is security deposit? What is clarified by Article 622-2 of the Civil Code
A security deposit is money that a tenant deposits with a landlord to secure unpaid rent, restoration costs, and other financial obligations arising from the rental agreement. The Civil Code revision that took effect in 2020 clarified the nature of this security deposit and the concept of return.
After the lease ends and the property is returned, the landlord will return the remaining amount after deducting the tenant's debts. Debts here include unpaid rent, unpaid common service fees, and restoration costs deemed to be borne by the tenant.
The important thing is not to think of the security deposit as money that you don't have to pay back. The security deposit is similar to a deposit and will be returned if there is any remaining amount after settlement. Even in an era where the number of properties with zero deposits is increasing, if you ignore this basic principle, you will lose credibility when you move out.
For example, even if the cost of replacing the wallpaper is to be deducted from the security deposit when you move out, it is not enough just because it is dirty. It is important to determine whether the stain is beyond normal wear and tear, whether it is due to intentional or negligent behavior on the part of the tenant, and whether it can be explained by comparing it to the condition when the tenant moved in.
What is restoration to original condition? Scope to be confirmed under Article 621 of the Civil Code
Restoration to its original condition means returning the property rented by the tenant to its original condition to the extent required by contract or law. However, this does not mean that the item will be returned to the exact same condition as when it was rented.
According to Article 621 of the Civil Code, while the tenant is obligated to restore the property to its original condition for damage that occurs after receiving the property, as a general rule, the obligation does not apply to wear and tear caused by normal use or earnings, and deterioration over time. This is the most commonly misunderstood part of the move-out settlement process.
Sunburn on wallpaper, slight dents in the floor from placing furniture, natural deterioration of equipment, etc. can be treated as normal wear and tear or deterioration over time. On the other hand, the tenant may be responsible for stains caused by smoking, scratches caused by pets, mold caused by neglecting cleaning, holes caused by unauthorized construction, etc.
For more details on the scope of work, please see [What is restoration work?] Organized by Contents, costs, and troubleshooting that rental owners should know. In this article, we will focus on the operation of landlords after the revision of the Civil Code.
How should normal wear and tear and tenant burden be distinguished?
The line between normal wear and tear and the tenant's responsibility can be easily disputed if it is judged only at the time of moving out. It is necessary to confirm the condition, contract details, usage status, and cause of damage before moving in.
In management practice, it is easier to organize by dividing it into the following four categories.
| Classification | Examples | Principles |
|---|---|---|
| Normal wear and tear | Minor dents due to furniture installation, discoloration due to sunlight | Easily borne by the landlord |
| Deterioration over time | Natural fading after the end of the equipment's service life | Lessor is likely to bear the burden |
| Intentional/negligent | Holes caused by objects hitting objects, stains due to lack of cleaning | Tenant may be responsible for this |
| Violation of the duty of care | Significant mold due to unattended water leakage and lack of ventilation | Can be borne by the tenant |
Even if you suddenly explain this classification during the move-out meeting, it will be difficult for the tenant to understand. We will explain the concept of restoring the property to its original condition when signing the contract, take photos of the interior when you move in, and sort out the causes of damage by location when you move out. It may seem simple, but this is the strongest preventive measure.
The relationship with the duty of care of a prudent manager is [What is the duty of care of a prudent manager for rental properties?] It is also connected to Violation risks and practical measures explained by management professionals. Claiming the cost of restoring the property to its original condition is not just a repair estimate, but also a matter of how to explain the tenant's usage status.
What evidence is needed to explain the tenant burden?
To explain the tenant's burden, it is not enough to simply say that there is damage. It is necessary to connect and show the condition before moving in, the cause of the occurrence, the relationship with neglect and usage, and the validity of the estimated price.
The following is the minimum evidence a management company should have:
| Evidence | Scenes of use | Risks in case of shortage |
|---|---|---|
| Photo when moving in | Compare with damage when moving out | Unable to determine if the damage was originally there |
| Contracts/Special Provisions | Check the scope of the tenant's burden | The basis for claims becomes abstract |
| Contact history during tenancy | Check for water leaks, mold, and equipment defects | Difficult to explain violations of the duty of care |
| Record of witnessing the move out | Record the damage and the tenant's understanding | It is easy to be told that "no explanation was given" at a later date |
| Estimate | Indicates work items, quantity, and unit price | Request for "one set" creates a sense of distrust |
The important thing here is not to use the evidence just to fight the tenant. Evidence is a common document that helps landlords and tenants agree on the same understanding. Only requests that can be explained will be made, and those that cannot be explained will be sorted out by the landlord. This attitude will reduce trouble as a result.
Points of contracts and special provisions that landlords should review
After the revision of the Civil Code, landlords will need to check the wording of security deposits, restoration to original condition, and special agreements, rather than continuing to use template contracts as is. Particular attention should be paid to special clauses that are too broad, such as making the tenant responsible for normal wear and tear.
A special agreement does not become valid just by writing it down. When requesting a heavier burden from the tenant than usual, it is important that the content is specific and that the tenant understands and agrees to it. Simply writing in ambiguous language that ``the tenant will be responsible for all cleaning costs when moving out'' leaves room for dispute later.
Items that landlords should review include:
- Is the definition of security deposit and return period clear?
- Is the scope of restoration to original condition differentiated from normal wear and tear and aging deterioration?
- Are the details of the special agreement borne by the tenant specific?
- Is there a written explanation of how to settle the bill and how to present the details when moving out?
- Is it linked to check sheets and photo records when moving in?
A contract is not just to protect the landlord after a problem arises. This is a tool to help you get on the same page with the tenant when moving in. The more trusted the rental management, the more detailed they will be in explaining the entrance.
When explaining a special agreement, it will be easier to use it in practice if you separate the expressions as follows.
| Expressions to avoid | Desirable expressions |
|---|---|
| All moving-out costs are the responsibility of the tenant | Except for normal wear and tear and deterioration over time, damage caused by the tenant's intention or negligence may be the responsibility of the tenant. |
| A set of restoration costs will be deducted from the security deposit. | The cost of restoring the property to its original state will be deducted from the security deposit after details of the work items, burden classification, and basis are shown. |
| We will always charge the cleaning fee | We will confirm the scope and implementation details agreed upon in the contract and write them in the details |
| If you have a pet, you will be charged the full amount | If we find damage beyond normal use, such as odors or scratches caused by your pet, we will organize the charges. |
Even a slight change in wording can change how tenants perceive you. Rather than forcefully pushing the issue, it is better to show the conditions and basis for the burden first, as a result, the settlement will be settled more quickly.
Practical flow to prevent troubles when paying for your departure
The quality of the move-out settlement is not determined only by the move-out date. It is determined by the flow before moving in, at the time of signing the contract, during moving in, notification of moving out, witnessing, estimate, and payment details.
In practice, it will be stable if you arrange it in the following order.
- Before moving in, take photos of the interior and record any scratches or dirt.
- Explain the concept of restoration to original condition and security deposit settlement at the time of signing the contract.
- Keep a record of equipment problems and contact history during your stay.
- Check the damaged areas with photos and notes while witnessing the move out.
- Separate work items, quantity, unit price, and burden classification in the estimate.
- In the settlement statement, clearly indicate the security deposit, unpaid amount, amount borne by the tenant, and amount refunded.
- If a tenant asks a question, explain it using records and standards, not emotions.
Once this process is in place, the scope that can be claimed from the tenant will become clear. On the other hand, if there are no photos, no explanation, or only a set of estimates, it will be difficult to convince the landlord, even if they have a point.
To organize terminology for management staff, please refer to [What is the difference between restoration to original condition, restoration to original condition, and restoration to status quo? If you link it with Practical explanation for management staff to use it correctly, it will be easy to use for in-house training.
It will be easier to explain the payment details if you list not only the "amount" but also the "reason for the burden" as shown below.
| Item | Amount | Burden Category | Explanation |
|---|---|---|---|
| Partial reupholstery of Western-style room wallpaper | 18,000 yen | At tenant's expense | Check for smoking stains that are not shown in the photo when moving in |
| Minor furniture marks on the floor | 0 yen | Lessor's responsibility | Minor dents due to normal use |
| Cleaning upon moving out | 22,000 yen | Payable by tenant based on special contract | Fixed cleaning fee explained at time of contract |
| Natural failure of equipment | 0 yen | Lessor's burden | Replacement due to aging |
By using this format, the tenant can check not only how much it cost,'' but alsowhy it is their responsibility to pay.'' Landlords can also specify items that they will not charge, making it easier to avoid the impression of overcharging.
Restoration rules remain the same even for properties with no deposit
Even with zero deposit properties, the idea of restoring the property to its original condition does not disappear. The difference is that there is no deposit as a source of funds to be deducted when moving out, so you need to separately claim the tenant's share.
Zero security deposit has the advantage of reducing the cost of moving in, which is advantageous when recruiting. However, the collection risk and explanation burden increase as the bill is paid in arrears when you move out. In exchange for zero deposits, landlords need to use a guarantee company, provide a special contract for cleaning when moving out, provide explanations when moving in, and provide more detailed photographic records.
The important thing here is not to doubt the tenant. It is important to share the rules from the beginning and clarify what the tenant may be responsible for. Transparency protects both landlords and tenants.
At INA, we believe that rental management is not just administrative processing, but a job that builds long-term trust. Deposit settlement may seem like a matter of amount, but it is actually a scene that shows the attitude of the management company and owner.
Checklist that landlords want to check right now
Please check the following regarding security deposits and restoration measures after the Civil Code revision.
- The contract clearly states when the security deposit will be returned and what will be deducted.
- The special clause for restoration to original condition is specific and distinguishable from normal wear and tear.
- Save check sheets and interior photos when moving in
- Confirmation items when witnessing departure are standardized.
- The landlord and tenant burdens are separated in the estimate and settlement details.
- The management company has words to explain to tenants
- We have decided on the recovery flow for moving out costs for properties with zero security deposit.
Each item is a simple item. However, in rental management, this simple preparation can prevent problems with moving out, poor reviews, and prolonged vacancy periods.
In the short term, detailed records and explanations may seem like a hassle. That's why it's important to have a system in place. Creating an operation that does not rely on people simultaneously protects the owner's assets and the peace of mind of the tenants.
Frequently asked questions (FAQ)
Q1. Do I have to return the security deposit in full due to the revision of the Civil Code?
A. The security deposit is not guaranteed to be fully refunded. The remaining amount will be returned after deducting unpaid rent and restoration costs deemed to be borne by the tenant. However, it is necessary to be able to explain the deduction in detail and grounds.
Q2. Can the tenant claim normal wear and tear and deterioration over time?
A. In principle, normal wear and tear and deterioration over time are not included in the tenant's obligation to restore the property to its original condition. Even in the case where the tenant is required to pay the burden under a special agreement, it is important that the content is specific and that the tenant understands and agrees to it.
Q3. Can I claim restoration costs for properties with zero security deposit?
A. Even if the security deposit is zero, you can claim the cost of restoring the property to its original condition, which is considered to be borne by the tenant. However, since it cannot be deducted from the security deposit, you will need to be more thorough in your explanations, details, and collection flow when you move out.
Q4. Doesn't the landlord have to do anything if I leave it to the management company?
A. Even if you entrust the property to a management company, you should check the contract, special terms, and settlement policy as the landlord. The quality of the management company's explanations is directly linked to the trust of the owners. The more you delegate, the more important it is to share standards.
I also want to read
- What is restoration work? Contents, costs, and troubleshooting that rental owners should know
- What is the duty of care for rental properties? Violation risks and practical countermeasures explained by management professionals
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