In practice, for a long time, participants in transactions use such a tool as a security payment. The Civil Code of the Russian Federation, however, until 2015 did not contain rules governing its application. Currently, the regulations governing its use are officially in force. Moreover, the norms determine its specificity in a slightly different way than it was previously understood.
Security payment: civil law
The Code contains two standards related to the use of this tool. The legislation provides its definition and indicates key features. A security payment is a payment by one of the participants in a relationship in favor of another certain amount. At the expense of it, the execution of the terms of the transaction by the party is guaranteed. Payment provides, among other things, the obligation to compensate for losses or to pay a penalty in case of violation of the contract. This provision is secured by Art. 381.1 (paragraph 1) of the Code.
Appointment
Security payment as a way to ensure the fulfillment of obligations is used in a variety of cases. For example, the rules on its application apply to transactions where bonds, shares, other securities and items with generic characteristics are to be transferred to the account of guarantees. A security payment is provided under conditional transactions. For example, upon the occurrence of the agreed circumstances, it is included in the debt repayment account.
Specificity
You must clearly understand the properties that a security payment has. The Civil Code of the Russian Federation does not consider this instrument as a “fine”, the amount of which is lost by the debtor in violation of the terms of the transaction. It is used to cover property losses, debt. This follows from a direct interpretation of Art. 381.1, paragraph 1. The norm indicates that the security payment is a guarantor of the fulfillment of contractual terms and is included in the repayment of debt, but is not collected in excess of the established amount. If we consider this tool as a measure of responsibility, then we should take into account that it will have a compensatory character. In other words, its application is aimed at restoring the position of the creditor that existed before the violation of its interests. Accordingly, a security payment cannot act as a means of enrichment.
Formal requirements
What conditions must be met in order to apply a security payment? The Civil Code does not establish certain requirements for an agreement on its use, including its form. However, for practical reasons and based on the norms of the Code, the key conditions agreed by the parties should be present in the document. In particular, the agreement should indicate exactly what the obligation is secured by the payment, list the circumstances on the basis of which the creditor can satisfy the submitted claims at the expense of it. If these conditions do not exist, then the instrument in question cannot be used. In addition, the agreement should contain a specific payment amount. It should be borne in mind that its size may vary depending on certain circumstances. Therefore, it is advisable to indicate in the contract not a fixed amount, but a percentage.
Nuance
In paragraph 2 of Art. 381.1 there is an indication of the period of occurrence of circumstances in which the security payment may be included in the repayment of debt. With a high degree of probability, the courts will consider the presence of this condition in the agreement mandatory, since any such mention in the norms is regarded as mandatory. Meanwhile, the absence of an indication of the date of occurrence of certain circumstances cannot lead to the recognition of a transaction as not concluded. This is due to the fact that the security payment, acting as an accessory (additional) obligation, is tied to the main one. Accordingly, there is an initial contract in which there is an indication of the period of occurrence of circumstances.
Distribution area
In practice, a security payment is applied at the conclusion of preliminary, rental, distribution agreements. This tool can perform other functions except warranty. For example, its introduction can be used as a condition to start fulfilling the terms of the transaction. In other words, the supplier or contractor does not start paying off obligations before the payment is received.
The specifics of the onset of circumstances
It is specified in clauses 2 and 3 of art. 381.1 of the Code. In the second paragraph, in particular, it is said that in case of failure to meet the stipulated circumstances within the prescribed period, the participant in the transaction may return a security payment. A similar rule applies in case of termination of the main agreement. Parties, however, may establish other conditions. For example, participants in a transaction can agree that a security payment will be counted as payment for products in recent periods if the bulk of the products are transferred or most of the work / services is completed. In this case, there is no reason to doubt that the terms of the transaction will be fulfilled. Similarly, you can apply the instrument in question in the lease. In this case, the amount will cover the debt for the last month. This will avoid multiple transfers of funds from account to account, since the creditor will already have a security payment at his disposal. Problems with resolving the issue of sending back money to the debtor will also be excluded.
Stimulating function
In paragraph 3 of Art. 381.1 of the Code provides that the parties may stipulate a condition under which an additional deposit or refund of a security payment is made in the event of specific circumstances. This provision makes it possible to stimulate the legitimate behavior of the counterparty. As a rule, it is used when concluding long-term contracts to guarantee timely repayment of debt. For example, a lender may set a limit on obligations. If it is exceeded, the amount of deduction also increases. Also, the lender, on the contrary, can reduce the amount of security if the debtor timely repays the obligation.
Difficulties in transactions
A security payment cannot be used to secure a non-monetary liability. For example, it may be a condition for the timely transfer of the leased asset to the owner, maintaining the property in good condition, and so on. Formally, there is no opportunity to provide non-monetary obligations with payment. However, there is a way out of this situation. To use a security payment, a non-monetary liability should be converted into a monetary obligation. The lender must provide for a financial sanction in the agreement for violation of the terms of the transaction (forfeit). And to guarantee its execution will be just a security payment.
Compensation function
The agreement between the parties may provide for the return of the security payment upon termination of the contract in the absence of violations of its terms. This can happen for a variety of reasons. However, in any case, the procedure should be voluntary by both participants. The agreement may establish compensation in case of unilateral termination of relations. However, participants often agree that the security payment is not refunded, but counts towards the repayment of this amount.
Differences from the deposit
As mentioned above, the main function of a security payment is compensation for probable losses. It does not act as a tool to punish a participant who violated the terms of the transaction. This makes the payment different from the deposit. The latter, by agreement of the parties to the relationship, may be transferred in excess of the amount of losses with offset, unless otherwise provided by the agreement.
Important point
Unlike many other methods of collateral, except for a deposit, the payment in question allows the creditor to receive the amount before violation of the terms of the transaction. Other means involve the transfer of compensation after the commission of certain actions by the debtor. The Civil Code has no prohibitions on the use of a security payment by a creditor for their own purposes. The deposit is accounted for as part of the agreement. This rule does not apply to a security payment, unless it is established by the parties. Thus, it allows not only to receive amounts under the main agreement, but also to have additional financial guarantees.
Transaction subject
As it are mainly cash. Until recently, civil turnover required financial support, but it was not directly provided for in the Civil Code. Other funds did not allow guaranteed receipt of money if the counterparty did not comply with the conditions. The only exception was a bank guarantee. It was formally independent of the main debt and provided by a solvent organization. The wide distribution of this option is hindered by its high cost. At the same time, the subject of collateral to a certain extent acts as a lack of payment. For example, if we are talking about a large amount, the debtor is unlikely to seek to withdraw it from circulation. In addition, for this he does not receive any interest. However, the parties may agree on their accrual. Such a fee would be fully justified. This is due to the fact that the debtor's funds are held by the creditor, and the Code does not prohibit the latter from using them for commercial purposes.
Foreclosure
In addition to collateral, the payment can be used as some kind of “reserve fund”. For example, the terms of a transaction may provide for the right of the participant in whose account the funds are stored to spend them on paying off arrears. So, if the user under the lease agreement has not paid the next amount, the owner can count the security payment as it. In these cases, the agreement must provide for rules according to which the owner of the property will notify the tenant of the foreclosure. It is advisable to inform the subject in writing. The contents of the notice may be included in the claim of violation of the terms of the transaction.
Possible disputes
After the expiration of the lease term, the security deposit may be credited as payment for the last month or returned to the user. However, at this stage, the latter may have certain difficulties. If the owner dishonestly fulfills his obligations, getting the funds back will be extremely problematic. If the tenant regularly complies with the terms of the transaction, then in case of refusal he can go to court. Practice in this category of cases is very mixed.
Most courts adhere to the position that the right to foreclose on a security payment should be established by an agreement between the parties. If it is not provided, the actions of the owner repaying the last installment will be declared illegal. In addition, the courts indicate that sending a notification to the user about the recovery of payment is mandatory. Meanwhile, this rule is not established in the legislation. However, by notifying the counterparty, the party to the transaction demonstrates its good faith. Accordingly, evidence of the direction of the notice may contribute to the resolution of the case.
Conclusion
In general, it can be said that a security deposit can be a fairly effective tool for forcing a party to a transaction to properly fulfill its obligations. But when drawing up an agreement, it is necessary to clearly stipulate all conditions. The parties must come to a decision that would not infringe on their interests. Otherwise, the security payment will act as a discriminatory tool. If the conditions for its application are transparent, then there will be no disputes and difficulties in resolving them.