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Contractual penalty for withdrawal from a tenancy agreement due to non-payment of the security deposit

Summary/Abstract: The subject of consideration is the admissibility of the cessation of contractual penalties in the event of the lessor's withdrawal from a tenancy agreement, as a result of the tenant's failure to pay a security deposit against the lessor’s future rentals under the contract. Additional reservation of contractual penalty may relate only to non-performance or undue performance of a non-monetary obligation and therefore can’t be related to non-performance or undue perfor-mance of a monetary obligation (art. 483 § 1 k.c.). It’s important that the security deposit – in contrast to other forms of security – has a monetary nature. If you consider that this method of payment determines the nature of the security deposit as a cash payment and the tenant fails to pay the it or doesn’t restore the security to the original amount, then the provision for a contractual penalty for withdrawal from a tenancy agreement for that reason would be invalid. The question is if the nature of the rendition determines the manner in which it is fulfilled, or the purpose for which the debtor pays a specified amount of money. This issue may raise seri-ous doubts, but the automatic recognition of a security deposit as a cash rendition, although – literally speaking, possibly to consider – could lead to unlikely conclusions, given the nature and purpose of this form of warrant, especially in comparison to other forms. Consequently, in certain situations, the purpose and the essence of the rendition, its economic character, should be explored, since those elements determine the nature of the remdition within the meaning of art. 483 § 1 k.c.

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