Security deposit and continued occupation: can the landlord deduct the occupation indemnity even if it is “time-barred”?

The return of the security deposit is one of the most contentious points at the end of a residential lease. From the tenant's side, the idea is simple: “I hand back the keys, I get my deposit back”. From the landlord's side, the question is more nuanced: unpaid rent and charges, damage and, above all, a frequent situation, the tenant remaining in occupation after the end of the lease, giving rise to an occupation indemnity (indemnité d'occupation). As regards service charges, the related question of late reconciliation of charges under a commercial lease is examined in our article on the sanction for late reconciliation of charges.

In a judgment of 29 January 2026, the Cour de cassation ruled clearly: the occupation indemnity is among the “sums remaining due to the landlord” that may be deducted from the security deposit; and a tenant claiming the return of the deposit cannot raise against the landlord the limitation period applying to an action for payment of that indemnity (Cour de cassation, 3rd Civil Chamber, 29 January 2026, No. 24-20.758).

1) The previous framework: security deposit, time limit for return and limitation

The security deposit is governed by Article 22 of the Law of 6 July 1989: it is intended to secure performance of the tenant's obligations and must be returned within the statutory time limits, less any sums remaining due to the landlord (Law No. 89-462, Art. 22).
If it is not returned within the time limits, the balance owed to the tenant is increased by 10% of the monthly rent for each month of delay (Law No. 89-462, Art. 22, para. 7).

In parallel, actions “arising from the lease” are in principle subject to a three-year limitation period (Law No. 89-462, Art. 7-1).
It was on this ground that litigation strategies arose: some tenants argued that the occupation indemnity, which arises after the end of the lease (occupation without right or title), could neither be set against the security deposit nor be claimed if the landlord acted late. The time limits applying to rental claims and the means of interrupting them are set out in our article on the limitation of unpaid rent.

Finally, the security deposit regime and, consequently, its case-law applications are identical for furnished lettings serving as a main residence, since Article 22 is made applicable to furnished lettings (Law No. 89-462, Art. 25-3).
Only the cap differs: two months' rent (excluding charges) for a furnished letting (Law No. 89-462, Art. 25-6).

2) The decision of 29 January 2026: the occupation indemnity falls within the “sums remaining due”

In the case decided, the tenant sought return of the security deposit (with penalties). The landlord counterclaimed an occupation indemnity for the month following the effective date of the notice to quit (Cour de cassation, 3rd Civil Chamber, 29 January 2026, No. 24-20.758).

The Cour de cassation sets out a statement of principle:

• the occupation indemnity owed by a tenant who remains in the premises after the end of the lease is included in the “sums remaining due to the landlord” within the meaning of Article 22;
• consequently, a tenant who brings an action for return of the security deposit cannot raise against the landlord the limitation period applying to the action for payment of that indemnity.

In other words: where there is a balance to be returned (the security deposit) and a sum owed (the occupation indemnity), set-off is accepted as a mechanism of compensation, and the limitation argument becomes ineffective to prevent the deduction made at the time of return. The operation of set-off between the security deposit and rental debt as regards the subrogated insurer is analysed in our article on the insurer's subrogation and the security deposit.

This solution extends the reasoning already accepted for unpaid rent: the security deposit secures, among other things, payment of the rent (Cour de cassation, 3rd Civil Chamber, 8 April 2021, No. 19-23.343).

3) Practical consequences: landlords, tenants, professionals

For landlords

• If the tenant remains in the premises beyond the end of the lease, the occupation indemnity may be deducted from the security deposit when the amount to be returned is calculated.
• In practice, this increases the importance of documenting precisely: end date, date the keys were returned, condition reports, calculation of the indemnity (often indexed to the rent and charges) and supporting documents.

For tenants

• An action for return of the security deposit is not a “cash machine”: if continued occupation is established, the landlord may set off the corresponding indemnity, and the limitation argument will not be an effective defence.
• Operational priority: hand over the keys and keep proof that the premises have been vacated (handed over in person against a receipt, registered letter with acknowledgment of receipt, or a protocol).

For property managers and agencies

• The decision calls for vigilance on time limits and evidence: a well-kept move-out file (dates, correspondence, supporting documents) substantially reduces disputes and secures the landlord's position on the security deposit.

4) Identified litigation risks

• Rental disputes over (i) the exact date occupation ended, (ii) proof that the keys were handed over, (iii) the amount of the occupation indemnity.
• Late-payment penalties (Art. 22, para. 7) if the landlord is slow to return the deposit without documented justification.
• Technical debates on set-off: conditions (fungible, certain, liquid and due claims: Article 1347-1 of the French Civil Code) and date of effect (Article 1347 of the French Civil Code).

5) Practical recommendations

For the landlord

1. Calculate the occupation indemnity immediately where the tenant remains in the premises;
2. Prepare a clear statement (deposit / deductions / balance), with supporting documents;
3. In the event of a dispute, give priority to a written reply and then court proceedings (order for payment procedure (injonction de payer) or summary proceedings for an interim payment (référé provision), depending on the case).

For the tenant

1. Never leave any ambiguity as to the move-out date: keep a record of the return of the keys;
2. If the deposit has not been returned, send a formal notice referring to Article 22;
3. If deductions are made, require supporting documents and challenge them item by item.

Conclusion

The Cour de cassation establishes a simple rule with significant practical impact: the security deposit may absorb the occupation indemnity owed where the tenant remains in the premises, and the limitation argument does not allow the tenant to prevent that deduction (Cour de cassation, 3rd Civil Chamber, 29 January 2026, No. 24-20.758).
To prevent the end of a lease from turning into litigation, everything depends on evidence (dates, keys, supporting documents) and a rigorous exit strategy, for landlord and tenant alike.