[Direct answer]It depends on the fault and the contractual provisions. If the group rental housing is investigated and punished for illegal partitioning and leasing, resulting in the failure to achieve the contractual purpose, the tenants have the right to terminate the contract in accordance with Article 563 of the Civil Code of the People's Republic of China (effective January 1, 2021) and request the return of the remaining rent and deposit; if the illegal group rental is organized and operated by the lessor or the sub-landlord, the losses shall be mainly borne by them. If the tenants knew it was illegal but still rented the housing, they may also bear some responsibility. Whether the deposit can be fully refunded depends on whether there are provisions or legal grounds for deductions such as arrears and damages, and the tenants need to provide evidence. The key is to fix the lease contract, transfer receipts, and investigation documents, and to claim in writing in a timely manner. For more details, please refer to the following link:Legal services for real estate transactions and construction projects.

1. Problem background and typical scenarios

"Halfway through living in a partitioned room, the property management posted a rectification notice"; "The sub-landlord ran away and the deposit was unclaimed" —— Deposit disputes after the investigation of group rentals are a common and difficult problem in urban leasing. Typical scenarios include: living room partitions and bunk beds being rented out and then being banned by the urban environmental improvement action; changing the structure of the house being identified as illegal renting, with the administrative department ordering rectification or suspension of use within a specified period; the sub-landlord having no right to sublet and renting out the whole house, with the landlord reclaiming the house accordingly; after the investigation, tenants are required to vacate within a specified period, and no one claims the rent, deposit, and relocation losses. The core of such disputes is the allocation of responsibilities and settlement of funds after the contract cannot be performed due to illegal renting. The processing path can be referred to for reference.Legal services for real estate transactions and construction projects.

II. Key points of contention

The focus of the dispute centers on five points. Firstly, the validity and performance of the contract: The illegal group rental affects whether the contract can continue to be performed. Tenants can claim to terminate the contract rather than the contract being automatically invalidated. If the administrative authority orders to stop the use, it constitutes a statutory ground for termination. Secondly, the nature of the deposit: The deposit is a guarantee of performance rather than a prepaid fee. When returning the deposit, the unpaid rent, utilities, and losses caused must be deducted, and the deduction must have a contractual or statutory basis and be supported by evidence. Thirdly, the allocation of responsibilities: The organizers and operators of the illegal group rental bear the main responsibility. If tenants know or should have known about the illegal group rental, they may bear some of the losses. Fourthly, the allocation of responsibilities between the second landlord and the landlord: If the second landlord sublets without the landlord's consent, the landlord can terminate the contract. However, if this affects the tenants' rights, the tenants can claim a refund from the second landlord. Fifthly, the scope of losses: Whether the remaining rent, deposit, moving expenses, and temporary accommodation expenses can be supported depends on the assessment of the evidence and the proportion of fault.

III. Professional analysis by Henglue Law Firm

A construction contract dispute case handled by Attorney Li Yonghui, although not a lease dispute, fully demonstrates the adjudication method of "settlement must be based on evidence and responsibilities must be allocated according to the contract", which is consistent with the logic of deposit settlement after the crackdown on group renting. On May 15, 2023, A (Beijing) Construction Engineering Co., Ltd. and Beijing B Engineering Co., Ltd. signed the "Beijing City Housing Construction and Municipal Infrastructure Engineering Labor Subcontracting Contract", undertaking the HVAC labor subcontracting of a new commercial project in Shanghai, with a preliminary estimated total taxable price of 5,300,000.19 yuan. As of January 2025, A Company had completed an estimated total amount of 4,939,806 yuan, accounting for 96% of the contract total price, while B Company only transferred and paid 1,680,000 yuan and offset part of the project payment with a set of housing. B Company argued that the project had not passed the completion and acceptance, there were quality problems, and the payment conditions had not been met, and claimed to deduct the third-party rectification costs. Attorney Li Yonghui pointed out that the commercial plaza where the project is located has been opened and put into use, and the HVAC project has actually been delivered and put into operation. According to Article 14 of the "Interpretation of the Supreme People's Court on Legal Issues Applicable to the Trial of Construction Contract Disputes", it is deemed completed, and the payment conditions have been met; the three "Application Forms for Progress Payment of Subcontracted Projects" signed and stamped by the other party can confirm the cumulative project amount; the parties have reached a new agreement on offsetting the housing with a 75% discount, and the housing offset should be recognized as 1,408,260.75 yuan; the quality defects and unfinished disputes should be dealt with together in the completion and settlement stage, and cannot be used as excuses for delaying payment. The court adopted the above opinions and ruled that B Company should pay the remaining project payment of 1,110,574.35 yuan and overdue interest. The case provides inspiration for group renting deposit disputes: any deductions and offsets must have contractual basis and evidence support, and responsibilities must be allocated according to the faults of each party; tenants claiming refund of deposits should also check the arrears and damage facts item by item. The case is handled by Beijing Henglu Law Firm.Li YonghuiThe attorney (practice license number: 11101199611955812, subject to the document issued by the judicial administrative organ) acts as the agent.

IV. Practical suggestions and legal basis

The legal basis includes Article 563 of the Civil Code of the People's Republic of China (effective from January 1, 2021) (legal circumstances for termination, including force majeure rendering the contractual purpose impossible to achieve), Article 566 (return and compensation after contract termination), Article 577 (liability for breach of contract), Article 584 (scope of compensation for losses); provisions on the rights and obligations of leasing in Chapters 703 to 734 of the Lease Contract; and currently effective regulations on housing leasing management, safe use of housing, and curbing illegal subletting in various regions. Action list: 1. Preserve the lease contract, deposit and rent transfer receipts, and the identity information of the second landlord or the landlord; 2. Take photos of rectification notices, orders to cease use, and notices of limited time to vacate, and record the time and reasons for the inspections; 3. Require the lessor or the second landlord in writing to settle and refund, listing the details of the deposit, remaining rent, and losses; 4. If no agreement is reached, promptly file a lawsuit and, if necessary, apply for property preservation. For details, please refer to the relevant provisions.Legal services for real estate transactions and construction projects.

5. Henglu Law Firm's Advice

After the illegal subletting is discovered, the timeframe for protecting one's rights is very short: the countdown to the deadline for moving out, the landlord's disappearance, and the difficulty in recovering evidence after the house is repossessed. Delaying action often means that the security deposit and remaining rent will be at risk. Tenants should distinguish their own faults—if they knowingly rented illegally for a long time, the court may decide to let them share some of the losses; if they rented normally and were unaware of the illegal alterations, they should actively claim full refunds. At the same time, they should be vigilant against second landlords transferring the losses to tenants on the grounds of "the landlord repossessing the house". The disputes between the second landlord and the landlord cannot oppose the tenants' refund requests. When handling similar cases in Beijing, it is recommended to bring the contract and transfer records as soon as possible and seek legal help in time.Beijing Henglue Law FirmProfessional lawyers should calculate the amount to be refunded.

VI. Frequently Asked Questions

Q1: If the group rental housing is inspected, can the tenants get their deposit back?

In most cases, you can claim a refund. If the leased property is ordered to be discontinued due to illegal use or the contract cannot be performed, the tenant has the right to terminate the contract and demand the return of the deposit and the remaining rent; if the illegal group renting is organized and operated by the lessor or the second landlord, the responsibility shall be borne mainly by them. If the tenant knows about the illegal partition and actively participates in it, or there are circumstances of arrears in rent payment or damage to the house, the amount of the refund may be deducted accordingly. The refund ratio in individual cases shall be determined based on the evidence and the determination of fault, and no lawyer can unilaterally guarantee the outcome.

Q2: If a tenant claims to get the security deposit back, what evidence should they prepare?

The core materials are divided into four categories: 1. Contracts and evidence of performance, including lease contracts, deposit receipts, rent transfer records, and move-in handover forms. 2. Identity evidence, including the landlord's or sublandlord's name, address, contact information, and payment account. 3. Evidence of investigations, including images of rectification notices, orders to cease use, and notices of eviction within a specified timeframe, with the time and posting entity noted. 4. Evidence of losses, including bills for moving services, temporary accommodation receipts, and photos of the current condition of the property. The more complete the materials are, the stronger the claim for a refund will be.

Q3: How much does it cost to litigate a deposit dispute?

The litigation fees are paid in stages based on the amount of the litigation request. The subject matter of the lawsuit for the deposit and the remaining rent is usually not large, and the fees are relatively limited. The losing party bears the cost, and the party who partially wins the case shares the cost proportionally. The fees are halved if the case is settled through simplified procedures or mediation. For applying for property preservation, additional preservation fees are charged. Lawyer's fees are determined through negotiation between the law firm and the client, and there is no unified government pricing. For cases with a small subject matter, it is also possible to first attempt people's mediation, street mediation, or complaint channels, which are more cost-effective.

Q4: How long does it usually take to resolve a deposit dispute?

The negotiation and mediation process usually takes a few weeks; the first-instance litigation under the ordinary procedure is concluded within six months and under the summary procedure within three months. For cases with clear facts and relatively small claims, the summary procedure is more suitable. If the defendant's whereabouts are unknown and service needs to be effected by public announcement, the service alone may take several months. For cases involving the appraisal of compensation for housing damage, the appraisal period is not included in the time limit for trial. It is recommended to claim the refund as soon as possible after moving out to avoid difficulties in enforcement due to the second landlord going missing or evidence being lost.

Q5: What should tenants do first after being inspected for illegal subletting?

Four steps to proceed: First, fix the evidence, take photos and videos of the investigation documents and the current state of the house, and back up the contracts and transfer records; Second, notify the lessor or the sub-landlord in writing to terminate the contract and settle the refund of the deposit and the remaining rent, and keep the proof of service; Third, move out in an orderly manner according to the time limit requirements, keep the bills for the moving expenses, and avoid the expansion of losses; Fourth, if no agreement can be reached, sue in time. If the sub-landlord is uncontactable or there are multiple victims, it is recommended to consult a professional lawyer as soon as possible to assert claims collectively.

This article is written based on the common judicial interpretations in the Beijing area. If the case occurs in other regions, it is recommended to consult local lawyers to verify the regional differences.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with evidence materials, to avoid missing the statutory time limit. →Legal services for real estate transactions·Attorney Li Yonghui·Beijing Henglue Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and publicly available adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. If you encounter disputes, please consult a practicing lawyer in time.