Security Deposit Refund Rights in the Philippines

(Updated to 9 June 2025)

1. Why this matters

A security (or “damage”) deposit is money a tenant lodges with a lessor to guarantee faithful compliance with a lease. Because deposits can easily reach five- or six-figure peso amounts—especially in urban areas—the rules on how much may be collected, how it may be used, and when and how it must be returned are a frequent flash-point in Philippine landlord-tenant disputes.

2. Core legal sources

Layer	Key Provisions	Notes & Current Status (2025)
Civil Code of the Philippines (1950)	Arts. 1654 (lessor’s duties), 1657 (remedies if lessor defaults), 1659 (tenant’s duty to return premises); Arts. 1287–1290 (compensation/set-off)	Governs all leases—residential & commercial—unless a special law says otherwise.
Rent Control Act of 2009 (RA 9653)	§ 7: max of 1-month advance rent + 2-months deposit; landlord must return the balance of the deposit “within one (1) month after the end of the lease and actual turnover of the premises.” Failure = administrative fine ₱5 000–15 000 (§14).	Coverage originally to 31 Dec 2013, but successively extended: DOH-HUD directives (2014-19), RA 11571 (2021) to 31 Dec 2023, and RA 11891 (2023) now keeps it in force until 31 Dec 2027. Applies only to residential units whose monthly rent does not exceed ₱10 000 in NCR and other highly urbanized cities, or ₱5 000 elsewhere.**
DHSUD / HLURB rules	Administrative regulation on inspections, inventories, and dispute resolution; Uniform Rules of Procedure (2021)	DHSUD now hears condo & subdivision rent disputes when the unit is registered with it.
Local ordinances	e.g., Quezon City Fair Rental Regulation Ordinance No. 2501-2020	May mandate inspection checklists or set shorter refund periods; they cannot raise the cap above RA 9653 but can tighten consumer protections.
Small Claims Rules (A.M. 08-8-7-SC, 2022 revision)	Claim up to ₱400 000 (exclusive of interest & costs) without a lawyer	Most deposit-refund suits fall here after barangay conciliation fails.

Tip: Even if the leased unit exceeds the Rent Control Act’s rent ceiling (or is commercial space), the Civil Code’s default rule still requires the deposit to be returned once obligations are met; only contractual deductions for damage, unpaid rent, or utilities may be withheld.

3. How much can be demanded up-front?

Type	Maximum legally allowable
Advance rent	1 month (RA 9653 § 7)
Security/damage deposit	2 months (RA 9653 § 7)
Total	3 months’ worth of rent, all-in.

Collecting more (“key money,” “reservation fee,” etc.) on covered units is an administrative offense.

4. Legitimate uses of the deposit

Repair of damage beyond ordinary wear & tear — dents, holes, broken fixtures, lost keys, etc.
Unpaid rent or utility charges at the end of the tenancy.
Unfulfilled contractual obligations expressly chargeable against the deposit (e.g., cleaning fee), provided these are reasonable and were in the signed lease.

Ordinary wear & tear includes faded paint, minor nail holes, or worn grout—costs of normal habitation the lessor must shoulder (Art. 1654[2]).

5. Return procedure & strict timelines

Step	Statutory / jurisprudential requirement
1 – Pre-departure inspection	Preferably joint inspection 15–30 days before move-out; recommended but not yet mandatory nationwide.
2 – Turnover of keys & premises	Tenant must surrender possession (Civil Code Art. 1659).
3 – Itemised deduction statement	Best practice (and required by many city ordinances) within 30 days of move-out.
4 – Refund of balance	Within 30 days after actual turnover (RA 9653 § 7). Delay beyond this constitutes unlawful withholding and can attract legal interest (currently 6 % p.a.) from date of demand.

If the deposit is applied to last-month rent (common in practice) the landlord must still account for it in writing and refund any excess.

6. Remedies when the landlord won’t pay

Demand letter (Civil Code Arts. 1169 & 1657).
Barangay conciliation under Katarungang Pambarangay Law (mandatory for parties in the same city/municipality, unless the property is in a subdivision registered with DHSUD, which uses its own mediation first).
Small Claims Court – inexpensive, lawyer-free. Attach lease, proof of payments, demand letter, barangay certification.
DHSUD Adjudication / Regional Trial Court – for larger claims, complex factual disputes, or if the property is a condo/subdivision unit.
Criminal complaint (rare) – Only if fraud is involved; mere refusal to refund is ordinarily a civil matter but can be estafa if accompanied by deceit at inception.

7. Penalties & interest

Basis	Amount / rate
RA 9653 admin fine	₱5 000 – ₱15 000 per offense
Legal interest (case law)	6 % per annum (Nacar v. Gallery Frames, G.R. No. 189871, Aug 13 2013, applied by analogy to deposit refunds) from the date of extrajudicial demand until fully paid.

8. Selected jurisprudence

Case	G.R. No. / Date	Take-away
Spouses Reynes v. Intermediate Appellate Court	G.R. No. 73241, 13 Dec 1990	Landlord cannot refuse to return deposit on a blanket claim of repairs; must prove specific damage and cost.
Cruz v. Fernando Realty Corp.	G.R. No. 191211, 15 Jan 2019	Deposit may be offset only against items expressly contemplated in the lease; court awarded 6 % interest for delayed refund.
Pajarillo v. Court of Appeals	G.R. No. 160967, 18 April 2012	Advance rent cannot be unilaterally re-labelled as penalty; deposit distinguished from liquidated damages.

(Texts are paraphrased; consult the full decisions for exact holdings.)

9. Tax treatment & accounting

Bureau of Internal Revenue treats a security deposit as liability, not income, until it is applied or forfeited (BIR Ruling DA-400-06).
If applied to rent, it becomes income in that period and is subject to withholding tax.
Landlords should issue an Official Receipt when deposit is initially collected (not a Collection Receipt).

10. Special contexts

Context	Tweaks to the general rule
Commercial leases	Not covered by RA 9653 caps; parties are free to stipulate, but Civil Code refund obligation still applies.
Bed-spaces / dormitories	Usually under the rent ceiling; many LGUs impose 15-day refund periods.
Condo short-term rentals (“Air-bnbs”)	Treated as innkeeper/guest relationship; deposits often governed by platform T&Cs, but Civil Code lease rules apply to stays >30 days.
Foreclosure / sale during lease	New owner assumes refund obligation (Civil Code Art. 1623 & lease rule on purchasers in good faith).

11. Best-practice checklist for tenants

Insist on a written lease with the words “security deposit” and “advance rent” clearly separated.
Keep official receipts and electronic proof of transfer.
Conduct a check-in & check-out inventory (photos + joint sign-off).
Demand a written statement of deductions.
Send a demand letter immediately after 30 days if no refund is received.
File small claims within the prescriptive period (4 years for quasi-contracts, Art. 1146).

12. For landlords: avoiding disputes

Limit deductions to provable costs; attach receipts for materials & labor.
Refund first, litigate later; interest accrues quickly.
Consider keeping deposit in a separate escrow or bank account to underscore transparency.

Key Take-aways

Cap – 1 mo. advance + 2 mos. security deposit on covered residential units.
Refund deadline – 30 days after move-out.
Allowed deductions – Only for extraordinary damage, unpaid rent, utilities, or charges expressly agreed on.
Failure to refund can lead to fines, interest, and summary judgment in Small Claims Court.

While parties may craft their own lease, any clause that perpetually withholds or automatically forfeits the deposit—without a legitimate, quantifiable basis—is void for being contrary to law and public policy. Always read the governing statutes first, then customize your contract within those boundaries.

Disclaimer: This article is for informational purposes only and is not a substitute for specific legal advice. Laws and regulations may change; always consult a qualified Philippine lawyer or the Department of Human Settlements and Urban Development (DHSUD) for up-to-date guidance.