Lease for an indefinite period. Tenant’s demand for the return of a deposit. Failure to act.

At the beginning of the rental period the tenant paid the landlord a deposit of ISK 430,000. At the end of the rental period, the landlord returned only ISK 215,000 of the deposit. The landlord had made a claim against the deposit due to damages and inadequate cleaning. The tenant rejected the landlord’s claim and reiterated his demand to have the remainder of the deposit returned to him.  The Complaints Committee took the view that it should have been apparent to the landlord that there was a dispute regarding the tenant’s obligation to pay compensation. Consequently, the landlord should either return the remainder of the deposit or refer the matter to the Housing Complaints Committee within four weeks of the rejection by the tenant (see the fifth paragraph of Article 40 of the Rent Act).  The landlord considered that the tenant had failed to act as he had not submitted the matter to the Housing Complaints Committee until 14 months later when he reiterated his demand to the landlord for the return of the deposit. The Complaints Committee did not consider that this constituted failure to act as the Rent Act contains no provisions to that effect. On the other hand, the landlord had been under an obligation either to return the deposit or to refer the matter to the Housing Complaints Committee, or the courts, within the legally prescribed period.

The conclusion of the Housing Complaints Committee was that the landlord’s claim against the deposit had expired; consequently, he was obliged to return the remainder of the deposit to the tenant.