SECURITY DEPOSIT REFUND AND SETTLEMENT LETTER
Date: __________
Place: __________
From (the Landlord)
__________, __________, of __________
To (the Tenant)
__________, __________, of __________
Subject: Refund of the security deposit and settlement of accounts on the determination of the __________ dated __________
Dear Sir or Madam,
1. Background and definitions
1.1 By the __________ dated __________ ("the Lease"), the Tenant occupied, on the terms there recorded, the premises described as: __________ ("the Premises").
1.2 The term ran from __________. The Lease came to an end on __________ by reason of __________.
1.3 In this letter "the Landlord" includes a licensor, "the Tenant" includes a licensee, and "rent" includes licence fee, service charge and any other periodic payment reserved by the Lease. Words in the singular include the plural.
2. Handover of the Premises
2.1 The Tenant delivered up vacant possession of the Premises to the Landlord on __________ ("the Handover Date").
2.2 __________.
3. The Security Deposit
3.1 Under the Lease the Tenant paid the Landlord a refundable security deposit of __________ ("the Security Deposit").
3.2 The Security Deposit was held by the Landlord as security for the performance of the Tenant's obligations under the Lease. It was not rent, premium or consideration for any supply, and the Landlord did not become entitled to it by reason only of the determination of the Lease.
4. Itemised statement of deductions
4.1 The Landlord has deducted from the Security Deposit only the amounts set out in this clause and any retention expressly provided for in clause 8. No deduction is made otherwise than as set out here or there, and no deduction is claimed as a round or unvouched sum.
4.2 Total deductions: __________.
4.3 The Landlord shall, on the Tenant's written request, provide copies of the invoices, quotations, work orders, photographs, meter readings and statements of account relied on for each deduction, and shall do so within __________ days of the request. A deduction for which the supporting documents are not produced within that period is not payable, and the Landlord shall refund it to the Tenant within a further __________ days.
5. Amounts credited to the Tenant
5.1 Any further amount due from the Landlord to the Tenant is credited as set out in this clause.
6. The Net Refund Amount
6.1 The settlement is computed as follows:
— Security Deposit: __________
— Less total deductions under clause 4: __________
— Plus total credits under clause 5: __________
The net amount payable by the Landlord to the Tenant is accordingly __________ ("the Net Refund Amount").
6.2 If the amounts itemised in clauses 4 and 5, applied to the Security Deposit and after deducting any retention under clause 8, do not produce the Net Refund Amount, those figures prevail and the Landlord shall pay the amount they produce.
7. Payment
7.1 The Landlord shall pay the Net Refund Amount to the Tenant on or before __________ ("the Payment Date") by __________.
7.2 Payment shall be made in full, without set-off, counterclaim, retention or condition, other than the deductions itemised in this letter and any retention this letter expressly provides for.
7.3 The Tenant's bank account for payment is the account whose details are stated below or, where none are stated, the account the Tenant notifies to the Landlord in writing within seven days of the date of this letter.
8. Reconciliation of utilities, maintenance and other outgoings
8.1 __________.
8.2 The Tenant shall apply for the closure or transfer of any utility, telecom or internet account standing in its name in respect of the Premises. The Landlord shall provide the no-objection letters and other documents the utility or service provider requires.
9. Tax deducted at source
9.1 As to tax deducted at source on payments made under the Lease: __________.
9.2 The refund of the Security Deposit is the repayment of a capital sum and is not rent. No tax is deductible at source on it under section 194-I of the Income-tax Act, 1961. Where any part of the Security Deposit has been appropriated toward rent, that part is rent and tax is deductible on it in the ordinary way.
9.3 Each party shall issue to the other the certificates and statements the Income-tax Act, 1961 requires, within the time it prescribes.
10. Goods and services tax
10.1 __________.
10.2 The Security Deposit is not treated as payment for a supply unless and until the Landlord applies it as consideration, in accordance with the proviso to section 2(31) of the Central Goods and Services Tax Act, 2017. Where any part of the Security Deposit has been appropriated toward rent or another taxable charge, the Landlord shall raise a tax invoice for that amount together with the tax on it, and the Tenant may claim input tax credit as the law allows.
10.3 Amounts deducted for damage, dilapidations, reinstatement or compensation for determination within the lock-in period are treated by the parties as compensation for a loss, and not as consideration for a supply of agreeing to tolerate an act, consistently with CBIC Circular No. 178/10/2022-GST dated 3 August 2022. If the tax authorities take a different view, the party found liable shall bear the tax, and the other shall co-operate in issuing the documents required.
11. Disputing an item
11.1 If the Tenant disputes any deduction or any figure in this letter, the Tenant shall give the Landlord written notice within __________ days of the date of this letter, identifying the item, the amount disputed and the reason for disputing it. That period is "the Dispute Window".
11.2 The Landlord shall not withhold, delay or make conditional the payment of any part of the Net Refund Amount that is not the subject of a notice under this clause. The undisputed balance shall be paid by the Payment Date whether or not a dispute has been raised, and payment of it is not an admission by either party about a disputed item.
11.3 Within the same number of days from receipt of a notice, the Landlord shall provide the Tenant with the documents relied on for the disputed item, and the parties shall meet, in person or remotely, to try to resolve it.
11.4 If an item remains unresolved thirty days after the notice, either party may pursue it under the clause headed "Governing law and dispute resolution".
11.5 A sum found payable by either party on the resolution in writing of a disputed item, or on its final determination under clause 15, shall be paid within __________ days of that resolution or determination.
12. Full and final settlement and mutual release
12.1 On the Net Refund Amount being paid in full, and on the Dispute Window expiring without notice or on every item disputed within it being resolved in writing or finally determined under clause 15, this letter operates in full and final settlement and mutual discharge of __________, and neither party shall have any further claim against the other in respect of the matters so discharged.
12.2 Until both of those things have happened, the release does not take effect. The Tenant's countersignature of this letter is an acceptance of it and, once the Net Refund Amount has been received, a receipt for that amount; it is not a waiver of any item disputed within the Dispute Window.
12.3 This letter renounces no share, interest, part or claim in or against the Premises or any other property. What it discharges is monetary claims between the parties under the Lease. It is an agreement recording that mutual discharge, and is to be stamped as such.
13. No surrender, no new tenancy
13.1 The Lease came to an end on the date recorded above. This letter records the settlement of accounts between the parties. It does not grant, surrender, assign or cancel any lease or licence, and it does not create, declare, assign, limit or extinguish any right, title or interest in or over the Premises.
13.2 The Tenant is not in occupation of the Premises. No payment made or received under this letter is rent, and nothing in this letter is the Landlord's assent to the Tenant continuing in possession for the purposes of section 116 of the Transfer of Property Act, 1882.
13.3 Where the Lease was registered, the parties shall co-operate, at the cost of the party requesting it, in executing and registering any further instrument required to record the determination of the Lease in the records of the Sub-Registrar.
14. Notices
Notices under this letter shall be in writing and delivered by hand against acknowledgement, or sent by registered post with acknowledgement due or by a reputed courier, to the address stated for the recipient in this letter. Where an email address is stated for a party in this letter, notice may also be given by email to that address, and takes effect on the next working day.
15. Governing law and dispute resolution
15.1 This letter is governed by the laws of India and, so far as the law of a State or Union Territory applies, by that of __________.
15.2 A dispute arising out of or in connection with this letter which is not resolved under the clause headed "Disputing an item" shall be resolved by __________. For that purpose, the seat and venue of any arbitration, and the place of any court proceedings, is __________.
16. General
16.1 This letter and its annexures record the whole of what the parties have agreed about the Security Deposit and the amounts itemised in it, and replace any earlier statement of account between them on those matters.
16.2 No change to this letter is effective unless it is in writing and signed by both parties.
16.3 This letter may be signed in counterparts and by electronic signature. A document of this kind is not excluded from being made in electronic form by the First Schedule to the Information Technology Act, 2000.
Yours faithfully,
For and on behalf of the Landlord
Signature: ______________________________
Name: __________
Date: ______________________________
Accepted and countersigned for and on behalf of the Tenant
Signature: ______________________________
Name: __________
Date: ______________________________
Witnesses (recommended where this letter carries a mutual release)
- Signature: ____________________ Name: ____________________ Address: ____________________
- Signature: ____________________ Name: ____________________ Address: ____________________
RECEIPT
The Tenant acknowledges having received from the Landlord the sum of __________, being the Net Refund Amount, on ____________________ (date of receipt).
Signature of the Tenant: ______________________________
[ Affix a revenue stamp of Re. 1 here and sign across it. A receipt for a sum exceeding Rs. 5,000 must bear a revenue stamp under Article 53 of Schedule I to the Indian Stamp Act, 1899, read with section 30. ]