Security Deposits in Ukraine: Collateral Sums and "First and Last Month" Payments

Within the Ukrainian residential rental market, there is no statutory "security deposit" framework similar to the US or Western Europe. Under the Civil Code of Ukraine, there are no legal requirements to place funds in specialized escrow or designated accounts, nor are there statutory mandates for interest accrual on such sums.

Instead, a common market practice is for the landlord to request a payment covering the "first" month of rent and a "guarantee" (security) payment. The legal definition of this guarantee payment in the contract is crucial for determining how it is retained or refunded.

1. The Nature of the Insurance Payment or "Last Month"

Typically, the deposit comprises a sum equal to one month's base rent (infrequently two, for luxury properties with ultra-expensive designer renovations). In practice, and within the text of Ukrainian lease agreements, this sum can assume one of two distinct legal roles. If the contract is drafted unprofessionally, it routinely triggers severe conflicts upon move-out:

1. Advance Payment for the Last Month of Rent: If designated as "payment for the final month," the tenant may apply this sum to their final month of residency. This approach may be unfavorable for the landlord, as it reduces financial security for potential property damage or utility arrears at the end of the term.
2. Guarantee (Insurance) Deposit / Securing Payment (The Recommended Method): In professional practice, this sum is defined as a "Guarantee Payment" (grounded in Article 546 of the Civil Code of Ukraine regarding securing obligations). It is held by the landlord for the duration of the lease. The tenant remains responsible for paying the final month's rent separately. The guarantee sum is refunded only after a final inspection and settlement of all arrears.

2. Deductions: What Can and Cannot Be Withheld from the Deposit

The Civil Code of Ukraine dictates that "current repairs" are the burden of the tenant (unless otherwise stipulated), while "capital repairs" are the strict duty of the landlord. This boundary defines the legality of deductions.

Lawful Deductions (Subject to a Guarantee Payment clause):

The landlord holds the right to withhold funds from the guarantee payment (provided an Acceptance/Return Certificate documenting the defects is signed) for:

• Unpaid Utility Arrears: Unset bills for central heating, water, electricity, or internet services.
• Repairing Damaged Property: Costs to repair or replace household appliances (previously logged as functional), broken glass, or furniture damaged by the tenant or their pets.

• Deep Cleaning (Cleaning Services): Withholding funds for professional cleaning is legally defensible only if the contract explicitly mandates: "The tenant is strictly obligated to return the apartment in a state of cleanliness identical to the condition upon move-in."

Unlawful Deductions ("Normal Wear and Tear"):

Mirroring EU standards, Ukrainian law absolutely prohibits owners from withholding money for "natural wear and tear" (deterioration occurring during normal, expected daily use). This includes:

• Gradual fading of wall paint or minor wearing down of carpets in high-traffic areas.
• Insignificant, superficial scratches on furniture or laminate flooring.
• Appliance breakdowns linked purely to technical aging (e.g., the compressor in a ten-year-old refrigerator dies without any fault of the tenant regarding power surges or physical abuse).

3. The Refund Procedure and Penalty Sanctions

To safely conclude a lease, the Certificate of Acceptance-Transfer of Real Estate (Move-out Protocol) is paramount. This document (alongside photographs verified by both parties) locks in the final physical state of the apartment and the final utility meter readings.

• Timeframes for Refund: Customarily, the contract explicitly defines that the guarantee deposit will be refunded (either in full or minus validated damages) precisely on the day the keys are surrendered and the Move-out Protocol is signed, or occasionally within 3-5 business days after vacating. The State does not impose a rigid deadline; it is entirely subordinated to the contract.
• Early Termination Penalties: It is common for contracts to include a "Penalty Clause" stating that if a tenant vacates before the end of the term without providing the required notice (typically one month), the landlord may retain the guarantee deposit as a penalty for early termination.

The Landager software ecosystem empowers landlords in Ukraine to routinely upload photographic evidence and highly detailed inventory logs to a secure cloud server during property handovers. The integrated electronic meter tracking system ensures automatic, flawless calculations of final debts on move-out day, providing a transparent, undeniable justification for any deductions executed against the guarantee deposit in Hryvnia or currency equivalents.

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