## Why Security Deposit and Key Money Refund Disputes Are Widespread When tenants move out after ending a rental agreement, disputes over security deposit refunds with landlords and management companies are common. The reason is that the treatment of security deposits and key money is legally complex, and misunderstandings easily arise between tenants and landlords. As a basic point, a security deposit is money that a tenant should receive back when a contract ends, and it has the nature of a "deposited sum." Key money, on the other hand, is gratitude money that belongs to the landlord and is not subject to refunds. However, in practice, some properties are contracted with this distinction left unclear, and many tenants who receive explanations like "key money will not be returned" upon move-out question the legitimacy of such claims.
A comprehensive breakdown of the differences between "security deposit," "key money," "guarantee money," and "non-refundable deductions" required in Japanese rental contracts, with a focus on regional customs in the Kanto and Kansai areas. Real estate professionals explain the legal nature, refund conditions, and move-out settlement rules for each term, providing clarity for foreign residents who often find these terms confusing.
Explaining the estimated move-out costs and responsibility rules when flooring damage occurs in rental apartments. A comprehensive guide covering the differences between "tenant responsibility" and "landlord responsibility" based on Ministry of Land, Infrastructure, Transport and Tourism guidelines, practical damage prevention measures, and the importance of photographic evidence at move-in.
Many people wonder what "key money" is in rental deposits and why it must be paid. From the mechanics of key money to its historical background, regional differences, and practical negotiation strategies to reduce it to zero—real estate professionals explain everything.
Reviewed by: Nobuyuki MoriPresident, M-Assets Co., Ltd. / Licensed Real Estate Transaction Specialist (Miyagi #018212)
When tenants move out after ending a rental agreement, disputes over security deposit refunds with landlords and management companies are common. The reason is that the treatment of security deposits and key money is legally complex, and misunderstandings easily arise between tenants and landlords.
As a basic point, a security deposit is money that a tenant should receive back when a contract ends, and it has the nature of a "deposited sum." Key money, on the other hand, is gratitude money that belongs to the landlord and is not subject to refunds. However, in practice, some properties are contracted with this distinction left unclear, and many tenants who receive explanations like "key money will not be returned" upon move-out question the legitimacy of such claims.
Under Article 622 of the Civil Code, tenants have the right to request the return of security deposits in principle. However, rental agreements sometimes include the phrase "the security deposit will be applied toward restoration to original condition costs," which often leads to misunderstanding by tenants. In many cases, this language is printed only in small print on the contract, and the specific process and calculation method for refunds are not clearly stated.
Restoration to original condition refers to the obligation to repair wear and tear or damage that naturally occurs when a tenant uses a property. These costs should be calculated by distinguishing between normal wear and tear from regular use (aging and deterioration) and damage caused by tenant negligence. According to the Ministry of Land, Infrastructure, Transport and Tourism's "Troubleshooting and Guidelines for Restoration to Original Condition," normal wear and tear is borne by the landlord, and tenants are responsible only for damage caused by their own negligence.
However, in practice, many management companies deduct items like "full-scale cleaning costs" or "wallpaper replacement" uniformly from the security deposit, leading tenants to wonder "is this an illegal charge?" In reality, cleaning costs are not legally mandated in all areas, and the situation is such that they are often left to the discretion of management companies.
When unreasonable amounts are deducted from a security deposit refund, tenants can take several countermeasures.
As a first step, carefully review the itemized deduction list and consider whether each item is truly justified. For example, if you receive a charge for "full floor replacement: ¥200,000," research the market rate for flooring of the same area and determine whether the cost is reasonable. Standard floor replacement typically costs around ¥5,000 to ¥15,000 per square meter; if the charge significantly exceeds this, you have grounds to object.
Next, if you have objections, contact the management company by phone or email, or if possible, submit a written inquiry requesting detailed justification. At this stage, it's important to remain calm and professional—avoid being confrontational. Instead, maintain an attitude of "I would like a detailed explanation of this item." Many unreasonable charges are reconsidered when tenants inquire about them.
If you still don't receive a response or cannot accept the explanation, send a formal demand for a refund via registered mail with delivery confirmation. This type of registered mail creates an official record of when and what content you sent, which serves as evidence for future legal proceedings. At this stage, you can apply psychological pressure on the other party and encourage them to engage in negotiations.
When the deducted amount from a security deposit is ¥600,000 or less, "small claims court" proceedings in a district court can be used. Unlike standard civil lawsuits, small claims court reaches a judgment after a single oral hearing, which has the major advantage of streamlined procedures and minimal time and expense.
To file a small claims lawsuit, first submit a complaint to the district court. The complaint should state your reasons for requesting the return of the security deposit, the legal basis (such as Ministry of Land, Infrastructure, Transport and Tourism guidelines), and the history of the other party's improper conduct. On the date of the oral hearing, you can choose whether to appear in person or have a representative appear on your behalf. In many cases, even if a tenant pursues the case individually without a lawyer, the management company will not be represented by a professional attorney. Rather, the management company often recognizes their wrongdoing and agrees to a settlement.
As a real example, a tenant who had ¥200,000 improperly deducted from a security deposit filed a small claims suit and recovered ¥150,000. Through this lawsuit, the management company came to understand that their claim that "cleaning costs are customarily borne by the tenant" is not legally recognized, and they agreed to make a refund.
The most effective way to avoid disputes is to clarify how security deposits and key money are handled at the time of signing the lease. Before signing the rental agreement, always ask the management company questions about the definition of security deposits and key money, the scope of restoration to original condition, and who bears cleaning costs—and request written answers.
Since verbal explanations alone often lead to trouble later, it's helpful to send a confirmation email stating something like: "Based on our discussion today, the security deposit will be returned minus restoration to original condition costs. Are cleaning costs included?" Keep screenshots of their responses for your records.
It's also important to photograph the interior condition when you first move in. If there are any scratches or stains when you initially move into the unit, photograph them and send the images to the management company via email to establish evidence that "this damage existed before move-in." With this preparation, even if the management company claims "you caused that damage" at move-out, you'll have grounds to dispute it.
To avoid security deposit and key money disputes, it's important to know which parts of the rental agreement to examine carefully. Normally, contracts list "security deposit" and "key money" separately, but additional charges may be listed under names like "deposit application fee" or "cleaning costs."
Additionally, if the contract states "the following items will be deducted from the security deposit refund," you need to verify the specific items and assess whether each is reasonable. For example, if it says "damage to included furniture and fixtures," there's a possibility you could be charged for damage to fixtures that already existed when you moved in. Therefore, it's crucial to clearly document the condition of the unit at move-in.
If you encounter trouble with security deposit refunds, multiple resources are available for consultation. The first place you should consult is the Consumer Affairs Center. The Consumer Affairs Center provides free consultations and legal advice. Additionally, if you're working with a real estate agent belonging to a real estate association, you can request mediation through their complaints department.
Furthermore, you can also use free legal consultation services provided by lawyers or services like the Legal Support Center. By utilizing these services, you can have a professional evaluate the prospects of your security deposit refund claim, making it easier to assess whether your position is reasonable.
In conclusion, most security deposit disputes can be avoided through advance confirmation and documentation. Reading the rental agreement carefully, asking about any unclear points beforehand, and photographing the unit's condition at move-in and move-out are the most effective strategies to prevent disputes.
Security deposit disputes commonly arise when moving out of rental housing. By understanding the legal nature of security deposits and the proper scope of restoration to original condition, and by learning about evidence preservation and claim procedures, you can protect your rights against unfair charges.
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