[Direct answer]It's possible to deduct the deposit, but only for those items specified in the contract and supported by evidence. The deposit is not a penalty that the lessor can keep in full. Early termination of the lease by the lessee constitutes a unilateral termination by the lessee, and the lessor has the right to be compensated for actual losses, but must itemize the basis for the deduction: unpaid rent, arrears in utilities and property management fees, repair costs for damage to the house confirmed by both parties, and reasonable vacancy losses incurred during the re-letting process. These categories are likely to be supported. As for standard clauses stating "no refund for early termination of the lease" or converting the full deposit into a penalty, they are usually deemed excessive and subject to reduction. What the lessee needs to do is to fix the current state of the house at the time of handover and then check the settlement details item by item, rather than waiting until after moving out to recall the condition of the house.

1. Problem background and typical scenarios

In a housing rental relationship, the deposit serves a guarantee function: it guarantees that the tenant pays the rent on time, uses the property properly, settles all miscellaneous fees upon moving out, and returns the keys. It is not an additional income for the landlord, nor does it automatically become the landlord's property if the lease term is not completed. Early termination of the lease often leads to disputes because the landlord holds ready cash while the tenant is eager to move out and settle the balance. From the outset, the two parties have an asymmetric understanding of how much should be deducted from the deposit. Common triggers include job transfers or lease changes, housing defects such as water leaks, noise, or insufficient heating, failed rent adjustment negotiations, sudden changes in family or business plans, and tenants who didn't carefully read the early termination clauses when signing the contract. Disputes often arise not in court but on the day of key handover: the handover document fails to clarify the condition of walls, floors, and appliances; the electricity, water, and gas meter readings are not confirmed by both parties; and there's no receipt for the number of keys, access cards, or remote controls. When the landlord presents a settlement statement listing five or six deductions, the tenant realizes they have little written evidence to refute the charges. In Beijing's residential and office rental markets, there's no unified administrative pricing for deposit collection, storage, and return. Contractual agreements and handover documents serve as the primary basis for disputes. Therefore, even in cases of early termination, the amount recovered by a party with complete documentation may differ significantly from that of a party with no supporting materials. A tenant's early move-out doesn't mean they forfeit the deposit; nor does a landlord's deduction list automatically justify every charge. Both parties must refer back to the contract terms and original documents to verify each item individually.

II. Key points of contention

The first focus is on the legal nature of the deposit. Whether the deposit is a performance guarantee, a prepayment, or a pre-agreed penalty directly determines whether the lessor can retain the full amount. If it is classified as a guarantee, the lessee can only be compensated for actual losses within the scope of the guarantee, and the remaining balance should be returned after settlement. If it is classified as a penalty, the lessor can withhold the amount as agreed, but if the agreed amount is significantly higher than the actual losses, the lessee can request a reduction. If the contract simultaneously stipulates both the deposit and the non-refundable penalty for early termination, and the two provisions contradict each other, it is necessary to determine whether they are duplicate clauses used without consultation based on the context of the contract. The second focus is on the allocation of the burden of proof. If the lessor claims to deduct the deposit, it must provide evidence for each actual loss, the calculation method of the amount, and the causal relationship between the early termination and the loss. If the lessee claims to return the deposit, it must prove the condition of the house at the time of handover, the settlement of all fees, and the actual payment of the deposit. In practice, the lessor often uses a self-made settlement statement as all evidence, while the lessee only has a few photos taken afterwards. Both sides lack crucial evidence. The third focus is on the scope of losses. Whether the vacancy losses can cover the entire remaining lease term, whether the lessor timely posted rental information, whether the maintenance fees have deducted natural depreciation, and whether the property fees and utilities are settled according to actual meter readings all require itemized calculation, rather than simply following the contract. The fourth focus lies in the procedural aspects: requests for deposit return are usually handled by the basic courts at the location of the property or the defendant's residence. For cases with low amounts, small claims litigation or summary procedures may be applicable. If the contract contains a valid arbitration clause, the jurisdiction of the court litigation is excluded. Once the jurisdiction, statute of limitations, or trial procedures are chosen incorrectly, even if the claim is substantively justified, it will still consume additional time. Beijing courts have stricter requirements for the format of evidence originals and handover certificates. It is more reliable to sort the materials chronologically before filing a lawsuit than to submit them at the last minute.

III. Professional analysis by Hengluo Lawyers

When handling such disputes, we usually don't first ask how much can be deducted, but instead break down the settlement details and review them item by item. The first step is to classify the contract terms. Extract the clauses in the lease contract regarding deposits, early termination, breach of contract penalties, and the return of the property. Check whether the deposit has been written as a breach of contract penalty or non-refundable, and whether these clauses were pre-prepared by the lessor for repeated use and not negotiated with the lessee during the signing process. For ambiguous terms, they should be interpreted in favor of the party who provided the standard terms, which is the starting point of the review. The second step is to categorize the deductions. Common categories include five types: unpaid rent up to the date of lease termination, outstanding fees for utilities and property management, repair costs for damaged property, vacancy losses during the re-letting period, and breach of contract penalties calculated by days or months. Each category has its own eligibility conditions. If the lessor attempts to lump all deductions into a comprehensive amount, the court will typically require a breakdown of the items. The third step focuses on vacancy losses. To recover this item, the lessor must at least demonstrate that a reasonable period is required for re-letting, that they have actually published rental information or engaged an agent, that the property was vacant during the dispute period, and that the number of vacant days is within a reasonable range. Claiming full compensation for the entire remaining lease term or claiming vacancy losses while simultaneously renting the property to others will likely not be fully supported. The fourth step verifies the probative value of the evidence. A signed handover document from both parties is more probative than unilateral records from either party. Inspection images with time stamps and showing the full condition of the property are more reliable than retrospective partial photos. Utility meter readings must be corroborated by corresponding user payment receipts and property settlement documents. Repair costs require comparison images before and after damage, quotes, and invoices, while normal wear and tear from normal use must be excluded. The fifth step assesses whether the breach of contract penalty is excessive. If the agreed amount significantly exceeds the actual losses, the lessee may request a reduction, which should be based on the lessor's actual evidence of losses rather than the contracted amount. Finally, the sixth step calculates the account: Subtract the total deductions established and supported by evidence from the deposit to determine the balance to be returned. If the lessor has overcharged, the lessee can claim a refund in the same procedure. After completing this comprehensive review, the amount that can be deducted is no longer an arbitrary percentage, but a result supported by specific evidence.

IV. Practical Suggestions and Legal Basis

The action checklist for tenants can be divided into four steps in chronological order. 1. **Step 1**: Send a written notice of termination to the landlord according to the contractually agreed notice period before moving out, and deliver it in a traceable manner. Specify the date when the house will be vacated to avoid being accused of moving out suddenly. If the contract does not specify a notice period, leave a reasonable time and maintain communication records. 2. **Step 2**: Conduct a joint inspection on the day of handover and prepare a signed handover document. List the current conditions of the walls, floors, doors, windows, appliances, and furniture, record the meter readings for water, electricity, and gas, and list the number of keys, access cards, and remote controls. Simultaneously, take time-stamped photos of the entire house and keep the original documents for backup. 3. **Step 3**: After receiving the settlement details, do not sign or verbally acknowledge them immediately. Submit written objections to each deduction, requiring the landlord to provide the contractual basis and original documents for each charge, especially the calculation of the vacancy days and repair fee receipts. 4. **Step 4**: If no agreement is reached, choose a resolution path based on the dispute amount and the contract's dispute resolution clauses: - For small amounts and clear facts, use small claims litigation or simplified procedures. - For cases with valid arbitration clauses, file an arbitration request with the designated arbitration institution. From a legal perspective, the rules on performance guarantees, breach of contract liability, standard terms, and loss compensation in the Civil Code of the People's Republic of China (effective January 1, 2021) serve as the basis for determining whether the deposit can be withheld. The Interpretation of the General Provisions of the Contract Chapter of the Civil Code of the People's Republic of China (effective December 5, 2023) provides details on penalty reduction and loss determination. The Civil Procedure Law of the People's Republic of China (amended on December 24, 2021, effective January 1, 2024) stipulates simplified procedures, small claims litigation, and evidentiary rules. The Methods for Payment of Litigation Fees (effective April 1, 2007) specify that filing fees are calculated based on the total amount of the claim. The Arbitration Law of the People's Republic of China (amended on September 1, 2017) determines whether arbitration clauses can exclude court jurisdiction. For those needing to review contract clauses of similar types, please refer to our firm's guidelines.Business and contract disputes in enterprisesThe scope of services provided by the Special Topic Consultation Service.

The procedures and organizational laws need to be specified separately: the Company Law of the People's Republic of China (amended on December 29, 2023, and implemented on July 1, 2024); the Civil Procedure Law of the People's Republic of China, the amended version of which came into effect on January 1, 2022, and the amended version of which came into effect on September 1, 2023. When searching for judicial precedents, the historical changes of the laws should be checked separately.

5. Hengluo Law Firm's Advice

There are three things worth reminding repeatedly. Firstly, don't sign a handover form that is blank or incomplete, and don't say "I don't want the deposit anymore" as a polite phrase. Both written materials and instant messaging records will be submitted by the other party as self-admission materials. Secondly, don't store all evidence on just one mobile phone. Keep the original chat records, add notes to transfers, and save the original files and shooting times of photos. Store copies in the cloud and locally to avoid losing evidence if the device is lost. Thirdly, the request for a refund of the deposit and the lessor's claims for losses are two separate issues. If the lessor claims to deduct money, it doesn't mean you must first prove that you don't owe any fees. Keep clear of the burden of proof, and it will be easier to avoid being misled by a long settlement list during negotiations. It should also be noted that there are regional differences in handover practices and fee settlement procedures across different regions, and the contract terms and evidence status of individual cases will also affect the conclusions. For cases involving large amounts, numerous deductions, or where the other party has already filed a lawsuit, it's necessary to evaluate the legal path as soon as possible with the contract, handover form, settlement details, and payment proofs, and act within the statutory time limits to protect your rights in a legal and secure manner. Don't trust any verbal guarantees of the outcome.

VI. Frequently Asked Questions

Q1: If the lessor uses the security deposit to offset the losses during the vacancy period, will the court fully approve it?

Of course, it will not be fully recognized. To claim compensation for the loss during the vacancy period, three conditions must be met simultaneously: a contractual basis, the actual fact of vacancy, and the lessor having taken reasonable mitigation measures. If any of these conditions are not met, the compensation may be reduced. Courts usually only support a reasonable period required for re-letting. If the remaining lease term is entirely converted into a loss during vacancy, or if the lessor collects the loss during vacancy while renting out the property to others, it is difficult to obtain full support. According to the rules on compensation for losses and the obligation of mitigation in the Contract Chapter of the Civil Code of the People's Republic of China (effective January 1, 2021), and the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the General Provisions of the Contract Chapter of the Civil Code (effective December 5, 2023), the security deposit can only be deducted within the scope of itemized and documented deductions. The lessee can claim the return of the excessively deducted portion.

Q2: Which original documents should be kept for the check-out handover form and the photos of the house inspection?

At least four types of original documents must be retained. The first type is the handover form signed by both parties, which must specify the return date, the current condition of the walls, floors, and appliances, the number of keys and access cards, and the readings of water, electricity, and gas meters. The second type is the original files of the full-house acceptance inspection with time information, which can reflect the overall condition rather than just a partial view. The third type is the settlement certificates and payment invoices for water, electricity, gas, and property fees. The fourth type is the receipt of the deposit or the transfer receipt indicating the purpose of the transfer. Originals are superior to copies, and records jointly created by both parties are more reliable than those made by a single party. Photos taken retrospectively have significantly weaker evidentiary value. According to the provisions of the Civil Procedure Law of the People's Republic of China (amended on December 24, 2021 and implemented on January 1, 2024) regarding the types of evidence and the burden of proof, if the materials are in the possession of the other party, the party concerned may apply for an order to submit or investigate and collect evidence in accordance with the law.

Q3: Based on the amount of the litigation subject, which category does the acceptance fee for the lawsuit for the return of the deposit fall into?

Calculated by segmentation, the amount of disputes over deposits is usually not high, and most of them fall into the starting and charging brackets. According to the "Measures for the Payment of Litigation Costs" (implemented on April 1, 2007), the acceptance fee for property cases is paid in segments based on the amount of the litigation subject matter. When suing, the plaintiff shall pay the acceptance fee in advance, and the losing party shall bear it or share it according to the proportion of responsibility; if the case is tried by summary procedure or small claims litigation, the acceptance fee may also be reduced by half according to the regulations. There is no unified government pricing for attorney's fees. Generally, the attorney's fees are agreed upon in the entrustment contract according to the complexity of the case, the amount of the litigation subject matter, and the workload, by the way of piecework, percentage of the litigation subject matter, or hourly rate. Before taking action, it is necessary to calculate the balance that can be claimed together with the advance payment and the attorney's costs, and then decide whether it is more cost-effective to sue.

Q4: For the return of the deposit through small claims litigation, how long does it take from the filing of the case to the issuance of the judgment in the first instance?

Simplified procedures are generally concluded within three months, and small claims litigation takes even less time, with the first-instance judgment being final. According to the Civil Procedure Law of the People's Republic of China (amended on December 24, 2021 and implemented on January 1, 2024), the ordinary first-instance procedure generally lasts six months, and the simplified procedure lasts three months. For cases involving the return of deposits where the facts are clear, the rights and obligations are well-defined, and the amount of the subject matter meets the standards, the small claims litigation procedure can be applied, with the first-instance judgment being final. However, if the case requires appraisal, public announcement of service, or if one party appeals or needs to assess the degree of damage to the house, the timeframe will be extended accordingly. It is recommended to record the evidentiary period, court hearing schedule, and appeal period in the case file on the day of filing to avoid missing any key deadlines.

Q5: On the day of receiving the settlement details of the lease termination, which deductions should the lessee first check?

First, check three items: the unpaid rent up to the lease termination date, the outstanding fees for utilities and property management, and the repair costs for damages to the house. All three items can be directly verified using contracts, invoices, and receipts, and are also the most prone to natural depreciation or duplicate charges. The vacancy losses and early termination penalties should be listed separately, and the other party should be required to provide the calculation basis and supporting documents for each item. Do not accept a general lump-sum deduction. After verification, raise objections in writing on the spot and retain the delivery receipt. At the same time, take photos of the settlement details for future reference and do not sign "no objection" on the details. According to the "Civil Code of the People's Republic of China" (effective January 1, 2021) and the "Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the General Provisions of the Civil Code" (effective December 5, 2023), deductions without supporting documents are difficult to be justified.

Disclaimer: This article is compiled based on the current effective laws and regulations and public 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.