In the Philippines, the collection, management, and return of security deposits are primarily regulated by Republic Act No. 9653 (the Rent Control Act of 2009), which took effect on July 15, 2009. These provisions apply to covered residential units and are supplemented by the Civil Code of the Philippines (effective August 30, 1950).

This guide outlines the critical security deposit rules that Philippine landlords must follow.

Maximum Security Deposit Limits

For residential units governed by RA 9653 (monthly rent of ₱10,000 or below in Metro Manila and highly urbanized cities, or ₱5,000 or below elsewhere):

• Maximum Security Deposit: Landlords may demand no more than two (2) months' rent as a security deposit (RA 9653, Section 7).
• Advance Rent: Alongside the security deposit, landlords may only request a maximum of one (1) month's advance rent (RA 9653, Section 7).

It is illegal to exceed these caps for covered units. Requiring a tenant to pay, for instance, three months' security deposit or four months' total upfront rent exposes the landlord to penalties under the Rent Control Act.

Management of Deposit Funds

Under the Rent Control Act, landlords have specific fiduciary duties regarding the security deposit:

• Bank Deposit Requirement: RA 9653, Section 7 mandates that the security deposit must be kept in a bank under the lessor's account name as a deposit in trust for the lessee.
• Interest Accrual: Any and all interest that shall accrue therefrom shall be returned to the lessee at the expiration of the lease contract.
• Return Requirement: At the expiration of the lease, the security deposit and interest must be returned to the tenant, minus lawful deductions.

When Can a Landlord Withhold a Deposit?

The security deposit is intended to guarantee the tenant's compliance with lease obligations. Under Philippine law, landlords may make deductions for:

• Unpaid Rent: Any outstanding rent at the termination of the lease.
• Damages: The cost to repair damages to the property beyond normal wear and tear caused by the tenant, their family, or guests.

• Unpaid Utilities: Unpaid water, electricity, telephone, or other utility bills associated with the unit.

[!IMPORTANT] Landlords should conduct thorough move-in and move-out inspections. Documenting the property's condition with photographs and inspection checklists helps prevent disputes over deductions for property damage.

Returning the Security Deposit

Upon the expiration of the lease contract or the vacancy of the premises, the landlord must refund the deposit and any interest that shall accrue therefrom to the lessee at the expiration of the lease contract (RA 9653, Section 7). If deductions are made for unpaid bills or damages, these must be itemized in writing.

For disputes regarding the return of deposits, tenants may file a claim in the Metropolitan Trial Court (MeTC) or Municipal Trial Court (MTC) with jurisdiction over the property. Claims not exceeding ₱1,000,000 may be filed under Small Claims procedures.

If a tenant leaves the property with unpaid bills or damages that exceed the deposit amount, the deposit is settled therefrom, and the landlord may pursue legal action for the remaining balance.

Exemptions For

residential properties whose monthly rent exceeds the thresholds outlined in the Rent Control Act (e.g., a luxury condominium renting for ₱50,000/month), the amounts for security deposits and advance rent are entirely open to negotiation between the landlord and the tenant. These are strictly governed by the lease contract under the Philippine Civil Code's principle of freedom to stipulate.

See our Rent IncreasesPreview unavailable guide for details regarding changes to the base rent amount.

Stay Compliant with Landager

Manually calculating deposit interest and tracking return deadlines can lead to disputes. Landager allows Philippine property owners to securely track deposit balances, log condition reports with photos to justify deductions, and automate accounting to ensure compliance with RA 9653.

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