Rescission by the tenant.  Return of deposit. Lease for a definite period. Time limits.

The parties entered into a lease for a definite period from 20 January 2020 to 31 January 2022. The tenant noticed that the apartment, which was supposed to be new, had various defects. He sent a written demand for remedial action to the landlord on 2 June 2020. According to the tenant, the landlord did not begin to act on making good any of the defects he had pointed out. Consequently, the tenant rescinded the lease by a letter dated 2 September 2020. After this he requested that the landlord return him his deposit of ISK 420,000, which he had paid at the beginning of the rental period. The landlord neither made a written claim against the deposit nor returned it, but maintained that he was not obliged to return it because a lease for a definite period was still in force. The tenant, on the other hand, considered that as more than 4 weeks had elapsed since the date on which he returned the premises without the landlord’s having made a claim against the deposit, the time limit for doing this had passed.

The Complaints Committee considered the rescission of the lease to be unlawful since more than 8 weeks had elapsed from the time when the tenant made his complaint until he rescinded the lease on the grounds of the same demand. The landlord submitted a claim to the committee for the payment of full rent throughout the lease period. The committee rejected this claim and pointed out that the landlord had been under an obligation to minimise his loss and to take the necessary steps to let the premises out as soon as possible; this the landlord had failed to do. The committee noted that the landlord had been entitled to dispose of the deposit to cover outstanding rent payments during the lease period and after it ended without the consent of the tenant. The landlord was ordered to return the deposit, except for ISK 140,000 deducted in respect of rent for September.

Conclusion: The tenant’s rescission of the lease was unlawful, and consequently the landlord was entitled to retain compensation in respect of the rent for September.