Saudi Arabia Security Deposit Limits and Return Rules

Collecting a security deposit is a standard practice in Saudi Arabia to protect landlords against potential property damage or unpaid utility bills. With the implementation of the Ejar platform and new regulations from the Real Estate General Authority (REGA), the process of collecting, holding, and returning security deposits has become highly regulated.

Maximum Security Deposit Limits

Historically, landlords in Saudi Arabia could demand varying amounts for a security deposit, often ranging from one to two months' rent.

Under the newer Real Estate Brokerage Law, security deposits are now generally capped at a maximum of 5% of the total lease value.

• For example, if the total annual rent is 100,000 SAR, the maximum security deposit a landlord should charge is 5,000 SAR.
• Any amount collected in excess of this 5% limit may legally be interpreted as an advance payment of rent rather than a security deposit.

The Ejar Custody System

To eliminate disputes over the withholding of security deposits, Saudi Arabia integrated a deposit holding mechanism directly into the Ejar platform.

1. Payment Phase: The tenant pays the security deposit electronically through the Ejar platform when finalizing the contract.
2. Holding Phase: Ejar acts as a neutral third-party custodian, securely holding the funds throughout the lease duration.
3. Return Phase: At the end of the tenancy, the deposit is automatically refunded to the tenant's registered digital wallet, minus any agreed-upon deductions.

Allowable Deductions

A landlord may request deductions from the security deposit through the Ejar platform for the following reasons:

• Property Damage: Repairing damage that exceeds normal, anticipated wear and tear (e.g., broken windows, severe wall damage).
• Unpaid Bills: Covering unpaid utility bills such as water, electricity, or internet if they were the tenant's responsibility under the lease.
• Cleaning Costs: In some cases, if the property is left in an unsanitary condition contrary to the handover state.

Normal Wear and Tear

Landlords cannot deduct from the deposit for normal wear and tear. Examples of normal wear and tear include:

• Minor fading of paint or wallpaper over years of use
• Slight wearing of carpets in high-traffic areas
• Minor scuffs on floors

The Dispute Resolution Process

If a landlord claims deductions that the tenant disputes, the Ejar platform and REGA provide a structured resolution path:

1. Initial Assessment: The landlord submits evidence of the damage via Ejar. The burden of proof lies heavily with the landlord, who should ideally provide before-and-after photos and a signed move-in checklist.
2. REGA Mediation: Experts from REGA may act as mediators to assess the validity of the deduction claim.
3. Judicial Appeal: If the parties cannot reach an agreement through mediation, either party has the right to escalate the matter to the competent Saudi courts for a final, binding ruling.

Best Practices for Landlords

To ensure a smooth move-out process and protect your right to necessary deductions:

• Use the Ejar Checklists: Always complete a thorough, documented property inspection when the tenant moves in and when they move out.
• Take Photographs: Time-stamped visual evidence is the best way to prove the condition of the property at handover.
• Communicate Clearly: Inform the tenant ahead of time about what needs to be cleaned or fixed to receive their full deposit back.

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