China Security Deposit Laws: Collection, Return, and Deduction Rules

This guide covers security deposit laws china according to the 2021 Civil Code and the Housing Leasing Regulation (effective September 15, 2025).

Security deposit management is one of the most critical compliance areas for landlords in China. The Civil Code of the People's Republic of China, effective January 1, 2021, and the Housing Leasing Regulation, effective September 15, 2025, establish mandatory rules on how deposits must be collected, managed, and returned to ensure market transparency and protect both parties.

Deposit Collection Rules

Mandatory Contract Terms

Under the Civil Code principles of freedom of contract, landlords who collect a security deposit must clearly specify the following in the lease agreement:

Deposit Limits

China currently has no unified national statutory cap on security deposit amounts.

However, market conventions and industry norms include:

Local Regulations

Some cities have implemented more specific deposit management requirements:

• Beijing - Rental enterprises must place deposits in supervised escrow accounts
• Shenzhen - Established a rental fund supervision platform requiring standardized management
• Hangzhou - Promotes credit-based rental models; some scenarios allow reduced or waived deposits
• Affordable Housing Cap - In certain major cities (e.g., Shanghai, Beijing), security deposits for "Affordable Rental Housing" (Baozhangxing Leizu Fang) are strictly capped at one month's rent.

Deposit Return

Return Conditions

The deposit should be returned once the following conditions are met:

1. Lease has expired or been lawfully terminated
2. Tenant has completed the move-out handover
3. Any legitimate deductions have been subtracted
4. No contractual conditions for withholding remain outstanding

Recommended Return Process

1. Move-out inspection - Jointly inspect the property with the tenant and document conditions
2. Expense reconciliation - Verify outstanding utility bills and other charges
3. Wear assessment - Distinguish between normal wear and tear and tenant-caused damage
4. Itemized statement - Provide a written breakdown of each deduction with supporting amounts
5. Timely return - Return the deposit balance within the contractually agreed timeline

Lawful Deductions

Permissible Deductions

• Unpaid rent - Any outstanding rental arrears
• Utility bills - Unsettled water, electricity, and gas charges
• Repair of tenant-caused damage - Costs exceeding normal wear and tear
• Cleaning costs - Reasonable expense to restore the unit to move-in condition
• Other contractual charges - Such as holdover fees for delayed move-out

Impermissible Deductions

• Normal wear and tear - Minor wall fading, standard floor wear, etc.
• Pre-existing damage - Issues that existed before the tenancy began
• Damage not caused by the tenant - Natural disasters, building aging, etc.
• Inflated repair costs - Exaggerated or unsubstantiated repair invoices

Prohibition on Arbitrary Deductions

The Civil Code explicitly states principles of good faith and contract adherence: landlords may not deduct from the deposit without legitimate justification beyond the conditions agreed in the contract. This is a fundamental contractual provision, and violations may result in civil liability.

Dispute Resolution

If a deposit dispute arises, tenants or landlords may pursue the following remedies:

Best Practices for Landlords

1. Standard contract terms - Use government-recommended standard lease templates with complete deposit clauses
2. Move-in documentation - Take date-stamped photos and videos of the property at handover
3. Move-out comparison - Compare against move-in records to objectively assess damage
4. Itemized accounting - Provide detailed explanations and receipts for every deduction
5. Prompt return - Don't delay returns; good faith builds long-term reputation
6. Retain receipts - Keep all repair invoices and property fee records
7. File the lease - Complete administrative lease registration promptly

Landager's property management dashboard helps you track deposit status for each lease, set return deadline reminders, and store move-in/move-out documentation - keeping you organized and compliant.