Advance Rent and Security Deposits in Bangladesh: Rules & Practice

Few topics cause as much confusion — and as many arguments — between landlords and tenants in Bangladesh as advance rent and security deposits. A tenant is asked for "three months' advance" for a flat in Dhaka; a shop owner in a new market is asked for a large advance adjustable over several years; a family moving out waits weeks for their deposit (jamanat) to come back. Often nobody is quite sure what the law says, what is normal, or how the money should be recorded.

This guide sets out, in plain English, the difference between advance rent and a security deposit, what the Premises Rent Control Act, 1991 broadly covers, what common practice looks like for flats and shops, how to adjust advance month by month with a worked example, how to record and return the money properly, and the mistakes that lead to disputes. It is written for landlords, but tenants will find it just as useful. It is general information, not legal advice.

Advance Rent vs Security Deposit: What Is the Difference?

People in Bangladesh often use "advance" for both, but they are different things and should be written differently in the agreement.

Some agreements combine both, for example "two months' advance to be adjusted in the last two months, plus one month's security deposit refundable at the end". The wording matters. If the agreement simply says "advance Tk 60,000" with nothing else, both sides may later interpret it differently.

Position money or salami — a non-refundable payment for the right to occupy a shop — is a third, separate thing. We explain it in position money (salami) in Bangladesh explained.

What the Premises Rent Control Act, 1991 Says (In Broad Terms)

The Premises Rent Control Act, 1991 (Bari Bhara Niyantran Ain) is the main law on residential and non-residential tenancies in Bangladesh. Among other things, it contains provisions that limit how much advance and security a landlord may take, requires rent receipts, and deals with standard rent and disputes before the Rent Controller.

We are deliberately not quoting specific section numbers or limits here. The Act's provisions, how courts have interpreted them, and how strictly they are applied in practice are matters on which you should get current advice from a lawyer. What is clear is that:

• The law does contemplate limits on advance and deposits — landlords should not assume they can demand any amount.
• Written receipts for money received are expected.
• Disputes can be taken to the Rent Controller.

For a wider explanation of the Act, read the Premises Rent Control Act 1991 explained. In practice, many rentals in big cities are agreed at market terms that may differ from the letter of the law; if you are in any doubt, keep your demands reasonable and get advice.

Common Practice for Flats

For residential flats in Dhaka, Chattogram and other cities, you will commonly see arrangements like these (practice varies by area and building):

• One to three months' rent taken as advance, either adjusted in the final months or spread over the first months or year.
• A security deposit of about one or two months' rent, returned at the end.
• For corporate or expatriate lets, sometimes larger advance payments with a longer term, agreed by the company.

Very large demands — for example six months or a year's advance for an ordinary family flat — often put off good tenants and may conflict with the law. They can also create a large refund liability for you when the tenant leaves.

Common Practice for Shops and Markets

In shops, markets and malls, larger upfront payments are more common, especially in new developments where the owner uses them to fund construction or fit-out. Typical structures include:

• A substantial advance, adjusted against monthly rent over several years (for example, a fixed amount deducted each month).
• A security deposit held until the end of the lease.
• Sometimes, a separate salami (position money) which is not adjusted or refunded.

Because the amounts are large, clear written terms are essential: how much is adjusted each month, what happens if the shop is vacated early, and what happens if the owner sells the building.

How to Adjust Advance Rent: Two Methods

Method 1: Lump-sum adjustment at the end

The advance is kept untouched and applied in the final month(s). For example, two months' advance covers the last two months of the tenancy. This is simple but depends on the tenant giving proper notice so that everyone knows which are the "last" months.

Method 2: Monthly instalment adjustment

A fixed amount is deducted from each month's rent until the advance is used up. The tenant pays a reduced rent each month. This is very common for shops and for larger residential advances.

Worked Example: Monthly Adjustment of Advance

For example (illustrative): A shop in a Chattogram market is let at Tk 30,000 per month. The tenant pays an advance of Tk 3,60,000, and the agreement says Tk 10,000 will be adjusted each month.

• Monthly cash rent payable: 30,000 − 10,000 = Tk 20,000.
• Number of months to use up the advance: 3,60,000 ÷ 10,000 = 36 months (3 years).
• From month 37 the tenant pays the full Tk 30,000 (or the revised rent if a review has taken place).

If the tenant leaves after 30 months, the unadjusted advance balance of Tk 60,000 is owed back to them, less any agreed deductions such as unpaid bills. This is where many disputes start: the landlord has spent the advance long ago, and now has to find Tk 60,000 at short notice. A landlord who tracks the balance every month is never surprised.

Recording Advance and Deposits Properly

Good records protect both sides. At minimum:

1. Write the terms in the agreement. Amount, whether it is advance or deposit, how and when it is adjusted, and conditions for refund.
2. Give a receipt. A dated receipt stating the amount and what it is for. Bank transfer or mobile wallet records are useful supporting evidence.
3. Show the adjustment on monthly receipts. For example: "Rent Tk 30,000 — advance adjusted Tk 10,000 — cash received Tk 20,000 — advance balance Tk 2,40,000."
4. Keep deposits separate in your mind (and ideally your accounts). A security deposit is a liability you will have to repay, not income to spend.
5. Record changes. If the rent is revised or the advance topped up, write an addendum signed by both.

Our guide to rent receipts in Bangladesh explains what a proper receipt should include.

Returning the Deposit and Unused Advance

At the end of the tenancy:

• Do a joint inspection of the premises, ideally against the move-in checklist.
• Calculate unpaid rent, utility bills and fair damage costs (not normal wear and tear).
• Add up the unadjusted advance balance and the security deposit.
• Subtract deductions and return the balance promptly, with a written settlement statement.

For ready-made wording, see our security deposit return letter templates.

Advice for Tenants

• Ask for the terms in writing before paying: is it advance or deposit, how is it adjusted, when is it returned?
• Pay by traceable means (bank, bKash, Nagad) where possible and always get a receipt.
• Take dated photos of the flat or shop at move-in.
• Give notice as the agreement requires, so the advance can be adjusted correctly.
• If a demand seems excessive, you can negotiate, and you can seek legal advice about your rights under the Premises Rent Control Act, 1991.

Special Situations

The building is sold during the tenancy

If a landlord sells a building, the question of who owes the tenant the deposit and unadjusted advance must be settled in the sale. Tenants should be told in writing who holds their money. Buyers should ask for a list of all tenants' deposits and advance balances before completing.

The landlord dies or ownership passes to heirs

Heirs inherit the obligations as well as the building. Clear records make this far easier for the family and fairer for tenants.

Probashi owners

If you live abroad and a relative or manager collects advances, insist on receipts, a simple ledger of each tenant's advance balance, and deposits paid into an account you can see. Many family disputes start with "where did the advance money go?"

Sample Clauses for Your Rental Agreement

Clear wording prevents most disputes. The sample clauses below are illustrative and should be adapted to your situation and checked by a lawyer, especially for commercial leases or large amounts.

Advance rent (adjusted monthly): The Tenant has paid the Landlord Tk [amount] as advance rent on [date], receipt no. [number]. This advance shall be adjusted at Tk [amount] per month against the monthly rent from [month/year] until fully adjusted. Any unadjusted balance at the end of the tenancy shall be refunded to the Tenant, subject to clause [x].

Security deposit: The Tenant has paid a refundable security deposit of Tk [amount]. It shall not be adjusted against monthly rent. Within [number] days of the Tenant vacating and handing over the premises and keys, the Landlord shall refund the deposit after deducting only unpaid rent, unpaid utility or service charges, and the reasonable cost of repairing damage beyond normal wear and tear, with an itemised statement.

Add a line on notice period and how the final months will be treated if the advance is to be applied at the end. If the rent is revised during the tenancy, state whether the monthly adjustment amount stays the same or changes.

Utility deposits and other smaller amounts

Some landlords also take a small utility deposit — for example where the electricity sub-meter, gas or water bill stays in the owner's name and is billed to the tenant afterwards. This is reasonable if it is written down, receipted and refunded after the final bills are settled. Avoid stacking up many small "deposits" for keys, remotes, furniture and so on without records; combine them into one clearly described security deposit instead. Tenants find a single, clear figure much easier to accept than a list of charges that only appears at the end.

Common Mistakes

• Not specifying advance vs deposit. Vague wording guarantees an argument at move-out.
• Spending the deposit. Treating deposits as income leaves you unable to refund on time.
• No receipt, or receipt without adjustment details. After a few years nobody can prove the balance.
• Demanding very large advances. This can conflict with the law and scares away reliable tenants.
• Deducting for normal wear and tear. Faded paint after three years is not the tenant's fault.
• Delaying refunds without explanation. If you need time for final bills, say so in writing with a date.

Best-practice checklist

1. Keep advance and deposit amounts reasonable and consistent with the law and local practice.
2. Write clear terms: amount, type, adjustment method, refund conditions.
3. Give receipts for every payment and every adjustment.
4. Track each tenant's advance balance monthly.
5. Set aside deposits so you can refund them.
6. Inspect jointly at move-out and itemise deductions.
7. Refund promptly by a traceable method and get a signed acknowledgement.

Final Thoughts

Advance rent and security deposits exist to give landlords some security and tenants a fair deal. When the terms are written clearly, receipts are given, balances are tracked and refunds are made on time, they cause no trouble at all. Most disputes come from vague agreements and lost records, not from bad intentions.

If you have several tenants with advances being adjusted at different rates, a spreadsheet can quickly get out of step. Bariwala ERP (বাড়িওয়ালা ERP) tracks advance payments and adjustments per tenant, issues rent receipts, shows the due list and stores each agreement, so every balance is visible when a tenant renews or moves out.