Security Deposits and Advance Rent in Finland

Under the primary governing law, the Act on Residential Leases (481/1995), which came into effect on 1 May 1995, a landlord in Finland has the legal right to demand a financial deposit from the tenant before handing over the keys to minimize risks. In the Finnish context, the terms "security deposit" (vuokravakuus) and the more colloquial "guarantee rent" (takuuvuokra) mean the same thing, but legally it is referred to as a deposit (vakuus).

Maximum Amount (The 3-Month Rule)

In residential leasing (AHVL § 8), an absolutely strict maximum limit is set for a possible deposit:

• The amount of the deposit may be at most equivalent to three (3) months' rent.
• If the contract contains conditions that require a larger deposit, the condition is void for the exceeding part.

The most common practice in the Finnish rental market is to require a deposit equivalent to 1 or 2 months' rent. Often, for student apartments, the deposit may be even smaller or a fixed amount, such as 250 - 500 euros. The deposit must be delivered to the landlord as agreed, without exception, before the possession of the apartment and keys are handed over.

Purpose and Storage of the Deposit

Unlike in some European countries, a landlord in Finland is not required to set up a separate, strictly regulated escrow account for storing the funds, unless expressly agreed upon. Cash deposits are often simply transferred to an account specified by the landlord. The purpose of the deposit is to secure the fulfillment of all obligations arising from the lease agreement. It can be used to cover:

1. Unpaid rents.
2. Unpaid utility charges (e.g., water balancing bills).
3. Damage caused to the apartment that exceeds "normal wear and tear".
4. Cleaning costs if the final move-out cleaning has been neglected.

The tenant may not on their own initiative use the deposit to pay the rent for the final months.

Advance Rent (AHVL § 36)

In addition to a deposit, the law allows the collection of advance rent (ennakkovuokra), but this also has strict limitations. A landlord can demand advance rent for several rent payment periods for a special reason when concluding a lease agreement. In the practical housing market, purely advance rent is very rarely used. The maximum rent paid in advance may only apply to multiple predefined installments, up to a maximum of 3 months. Together with the deposit, the advance requirements should never become unreasonable for the tenant.

Normal Wear and Tear vs. Damages

When the tenancy ends, the landlord inspects the apartment (final inspection). The most central source of dispute is the fine line between normal wear and tear and compensable damage.

• Normal wear and tear (Normal living): Wear that arises from living. Holes left by pictures on the walls, normal dimming of floor surfaces, or small scratches on kitchen counters. The landlord cannot withhold the deposit to repair these.
• Compensable Damage / Negligence: Things that have arisen from carelessness. Deep scratches in the floor from a dog's claws, broken doors, total failure to clean the oven, or drawings on the wallpaper. The deposit can and should be used for these.

The initial inspection of the apartment and the photographic report made of it is critically important. If the landlord does not have evidence of the apartment's original condition, it is very difficult to prove that the damage occurred specifically during that tenant's time.

Returning the Deposit

The Act on Residential Leases (481/1995) does not specify a precise timeframe for the return of the security deposit after the tenancy ends and the handover of the apartment's possession. Furthermore, the Act does not explicitly require the landlord to provide written justification or receipts for deductions, although general legal principles apply to disputes.

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