Deposit and prepaid rent: rules, pitfalls and good advice for landlords

Everything you need to know about the deposit and prepaid rent

The deposit covers refurbishment and damage, while prepaid rent is used for payment during the notice period. As a landlord, you can typically require up to three months’ deposit and three months’ prepaid rent on move-in.

Use professionals for refurbishment, repairs or cleaning to make sure the pricing is fair and the documentation valid. Make sure any balance left after the settlement is paid out as quickly as possible.

If notice is given with a longer notice period, the landlord has a duty to actively try to relet the home during that period.

Deposit and prepaid rent

When you rent out a home, the deposit and prepaid rent are two of the most important financial tools you have as a landlord. Both aim to reduce risk, but they work in different ways and cover different needs.

The deposit is security for the landlord in case the tenant does not hand back the home in the agreed condition. It can be used to cover the cost of refurbishment, repairs or lack of maintenance. So it is closely tied to the physical condition of the home at move-out.

Prepaid rent is payment for the last period of the tenancy. If the tenant gives notice, the prepaid rent can be used to cover the rent during the notice period. So it gives the landlord a financial buffer.

The difference therefore lies in the purpose. The deposit protects against damage and defects, while prepaid rent secures payment of rent at the end of the tenancy. Both make good sense, because they reduce financial uncertainty. Renting out always involves a risk, and without these tools even small problems can turn into large financial losses.

How much may you actually require on move-in, and what is recommended?

Under the rent legislation, as a landlord you may require a maximum of three months’ deposit and three months’ prepaid rent, on top of the first month’s rent. This means that in practice a tenant can be asked to pay up to seven months’ rent on move-in. This does not include payments for utilities.

Example: If the agreed rent is DKK 10,000 a month, you can require 3 months’ deposit before move-in, equal to DKK 30,000, and a further DKK 30,000 in prepaid rent. On top of that comes the first month’s rent of DKK 10,000 (often paid on the move-in date itself).

The law sets a clear upper limit, but the question is what good practice is. Many professional landlords choose to require the maximum. This is because the risk of renting out is real, and dealing with disputes or missed payments can be both expensive and time-consuming. A typically recommended level is at least two to three months’ deposit, and ideally prepaid rent as well. This gives solid financial security without putting off serious tenants. If you choose to require less, it should be a conscious decision based on a specific assessment of the tenant. That could be relevant, for example, if the tenant has strong finances, a stable income or a particular situation that makes it hard to pay a large amount on move-in.

What may the deposit and prepaid rent be used for?

The deposit may be used to cover costs that arise from the tenant’s use of the home. These can be:

• Repairing and fixing damage to fixtures and the home.
• Painting and refurbishment.
• Cleaning, if the home is not handed back in a proper condition.
• Replacing broken installations.

It is important to stress that the deposit may not be used for normal wear and tear. It has to be something the tenant is liable for. Prepaid rent may only be used to cover rent during the notice period. It is not extra security for repairs or defects.

As a landlord, you have a duty to keep these funds properly and make sure they are only used for their intended purpose. When the tenancy ends, a settlement must be made, and any surplus must be paid back to the tenant.

What may you charge for the different refurbishment services?

When a tenancy is settled after move-out, questions often come up about what you as a landlord may charge for each service. This applies especially to the use of the deposit and the costs linked to refurbishment. The starting point is that all deductions from the deposit must be reasonable, documentable and directly related to the tenant’s use of the home. This means you cannot freely set your own prices without being able to back them up. The prices must reflect the market level and the work actually done.

• For example, painting walls will typically be assessed by square metres and the treatment needed. If it is a normal freshening up, it may in some cases count as wear and tear, which the landlord has to cover. If, on the other hand, it is neglect, such as heavy nicotine stains, holes in walls or uneven painting, the cost can be passed on to the tenant.

• For damage to fixtures or installations, such as the kitchen, floors or white goods, age and lifespan must be taken into account. You cannot demand payment for a brand new installation if the old one had already partly depreciated. A proportionate assessment must be made here.

• Cleaning is another area where disagreement can arise. If the home is not handed back clean, you can charge for professional cleaning. Here too, the price must be realistic and documentable.

If you are unsure about the price level or the scope of the work, we clearly recommend using professionals: a painter for painting, a carpenter for damage to woodwork or fixtures, and a plumber for problems with water and installations. That gives a more correctly done result, an invoice and a statement that can be used as documentation. Using professional tradespeople strengthens the landlord’s position considerably if there is a disagreement. Documentation from a professional carries more weight than your own assessment, and it reduces the risk of further disputes with the tenant.

A structured approach to pricing and documentation is crucial. When all costs are well documented and reasonable, the settlement becomes more transparent and easier for both parties to accept.

As a customer of BY Administration, you are in safe hands. We work exclusively with authorised professionals when it comes to refurbishment, repairs and cleaning.

Contact us today for a no-obligation quote.

How to make sure the money is handled correctly

To avoid disputes, it is crucial to keep track of documentation and finances. We recommend that you as a landlord at the very least keep track of:

• All payments received.
• Documentation of all costs deducted from the deposit.
• A clear and transparent move-out statement.

It is about trust. If the tenant sees that things are handled professionally and transparently, it reduces the risk of disputes.

The biggest mistake: poor documentation at move-in and move-out

One of the most common mistakes in renting out is a lack of documentation. Many landlords underestimate how important it is to get the move-in and move-out inspections right.

On move-in, a detailed report describing the condition of the home should be prepared. It should include photos and precise descriptions. The more detailed the documentation, the easier it is to assess any damage on move-out.

On move-out, another thorough inspection must be made. Here the condition of the home is compared with the move-in report. If the documentation is missing or inadequate, it becomes hard to make claims against the tenant. In the worst case, this can mean you cannot use the deposit, even though there is damage.

That is why it is crucial to keep control of the process from start to finish.

Adjusting the deposit and prepaid rent when the rent goes up

When the rent goes up, the question of adjusting the deposit and prepaid rent comes up. As these amounts are usually calculated as a number of months’ rent, it makes sense to adjust them in line with the rent.

It is common practice to adjust the deposit and prepaid rent so they still match the agreed number of months. However, this requires that it is agreed in the lease, or that the adjustment follows the applicable rules.

As a landlord, you should communicate clearly about the adjustment and give the tenant a reasonable deadline to pay the extra amount. Good practice is to handle it in a structured and predictable way. This creates confidence and reduces the risk of disagreements.

When must the deposit be paid back?

After the tenancy ends, the deposit must be settled and paid back within a reasonable time, and ideally straight away (in Danish). There is not a fixed deadline in every case, but the landlord is expected to act quickly and efficiently.

Typically this happens within a few weeks of move-out, once all costs have been settled. If you need to wait for invoices from tradespeople, it can take a little longer. What matters is that the process is transparent and that the tenant gets a clear statement. If amounts are deducted from the deposit, they must be documented. Unnecessary delay can lead to disputes and in some cases to claims from the tenant.

We recommend that any balance owed is paid out no later than 14 days after the statement has been sent to the tenant, and ideally as quickly as possible. This practice ensures an efficient end to the tenancy and shows that you as a landlord handle the process seriously and responsibly. It is also important to tell the tenant about this time frame as early as possible in the process, ideally at the move-out inspection or in the statement itself. When both parties agree on the process in advance, expectations are aligned.

Requiring a deposit and prepaid rent after move-in

A question that, from our point of view, unfortunately comes up often is whether you can require a deposit or prepaid rent after the tenant has moved in. The starting point is that it must be agreed when the lease is entered into. If no deposit or prepaid rent was agreed from the start, as a rule it is not possible to require it later without the tenant’s acceptance. The tenancy agreement is binding, and its terms cannot be changed unilaterally. There are, however, situations where it can be done. If both parties agree to change the agreement, you can enter into a supplementary agreement. This requires the tenant to accept the new terms voluntarily.

In practice, it is therefore very important to get everything in place from the start. Our experience is that a lack of security can often become a challenge later, if problems arise in the tenancy.

The landlord’s duty to relet

When a tenant gives notice, prepaid rent becomes especially relevant. It is closely linked to the agreed notice period and the landlord’s duty to limit their loss. Here the duty to relet (genudlejningspligt), which is rooted in the Rent Act (lejeloven), plays a central role.

As a starting point, prepaid rent covers the tenant’s payment during the notice period. If, for example, a tenant has three months’ notice and has paid three months’ prepaid rent, this amount will be used to cover the rent during that period. It gives the landlord financial security if the tenant moves out early or stops paying.

This does not mean, however, that the landlord can simply keep the prepaid rent regardless of what happens with the home during the period. Under the Rent Act, the landlord has what is called a duty to relet. This means the landlord must actively try to relet the home as quickly as possible after the tenant has moved out.

The duty to relet is about limiting the financial loss for the tenant. If the home stands empty for a period, the landlord may not just sit back and let the prepaid rent cover the whole notice period. A real effort must be made to find a new tenant.

This could be, for example, by advertising the home, holding viewings and responding to enquiries within a reasonable time. Documentation of this effort can be decisive if a disagreement arises later. If the landlord manages to relet the home before the notice period ends, it directly affects the prepaid rent. In that case, the landlord may not receive double rent for the same period. The new tenant’s payment will replace the previous tenant’s obligation, and the remaining part of the prepaid rent must be paid back.

It is therefore important to understand that prepaid rent is not extra income, but security for payment over a limited period. The duty to relet makes sure this security is not misused. The agreed notice period also matters. Many leases have three months’ notice, but it can vary. Whatever the length, the duty to relet applies throughout the period. The longer the notice period, the more is required of the landlord’s effort to relet.

As a landlord, it is good practice to work in a structured way with reletting. This includes clear marketing, realistic pricing and flexibility around viewings. Rent that is set too high or poor availability for viewings can in practice be seen as not meeting the duty to relet.

For the tenant, the rules give important protection. They make sure you do not pay rent for a period when the home has already been taken over by a new tenant. At the same time, they give the landlord an incentive to act actively and professionally.

The landlord does not, however, have a duty to accept a new tenant suggested by the tenant. This also applies when the tenant has found a potential new tenant from their own network who wants to take over the home during the notice period, or after it. The landlord still has the right to assess and approve who enters into a new tenancy agreement.

We recommend that tenant and landlord keep in regular, clear contact during the notice period. It helps if the landlord actively tells the tenant how the reletting is going and starts a dialogue if there is progress. A settlement should also be drawn up at this point, so both parties have the same overview.

At the same time, it can be useful for the tenant to contact the landlord now and then for an update on whether the home has been relet. This adds transparency and makes sure expectations stay aligned along the way.

If you are still unsure whether it makes sense for you to use professionals for your rental, you can read our article on exactly that:
Long-term rental: why use a property manager?

Sources

Lejeloven.dk. (2025). Deposit and prepaid rent (Depositum og forudbetalt husleje). Lejeloven.dk, in Danish. https://www.lejeloven.dk/lejer/indskud

Advodan. (2025). Rules for prepaid rent and deposits (Regler for forudbetalt leje og depositum). Advodan, in Danish. https://www.advodan.dk/da/privat/mit-liv/bolig/leje-udleje/depositum-og-forudbetalt-leje/

Lejeloven.dk. (2025). The landlord’s duty to relet (Udlejers genudlejningspligt). Lejeloven.dk, in Danish. https://www.lejeloven.dk/lejer/genudlejningspligt

Lejeloven.dk. (2025). Rules for deposits and prepaid rent (Regler for depositum og forudbetalt leje). Lejeloven.dk, in Danish. https://www.lejeloven.dk/udlejer/indskud

Data collected internally from BY Administration’s rental portfolio.