How do rental contracts and deposits work in Iceland in 2026?

Before handover, the landlord may demand security for unpaid rent and damage beyond ordinary wear. Cash tryggingarfé may not amount to more than three months' rent. Lawful forms also include a bank guarantee, a third-party personal guarantee, an insurance policy, a landlords' mutual insurance fund for commercial landlords, or another form both sides accept.

If you pay cash, the landlord must keep it in a separately marked demand deposit account at a commercial bank or savings bank earning the highest available interest until payout. Interest belongs to you. The landlord may not mix the money with personal funds or deduct from it without your approval unless a conclusion establishes your payment duty, though unpaid rent balances may be taken from the deposit. You may refuse a cash deposit if you offer another lawful guarantee the landlord deems satisfactory.

After you return the keys, the landlord has four weeks to make a written claim against the deposit. If no lawful claim arrives in time, the full amount plus interest should come back. Disputes can go to Kærunefnd húsamála (the Housing Complaints Committee). See How to rent a home and Avoid rental scams.

Leases may be fixed-term or open-ended. Fixed-term contracts usually end on the stated date without separate notice unless the written text allows early exit on named grounds. For open-ended residential leases, ordinary notice under the Rent Act is often one month for storage sheds, three months for single rooms, and six months for full dwellings. Notice starts on the first day of the month after it is sent. Landlords terminating open-ended leases need lawful grounds and must use the proper written process notified to HMS.

From 1 January 2026, landlords must register tenancy agreements in the HMS Rent register (Leiguskrá HMS). The register records housing type, location, rent, and validity. Registration also supports húsnæðisbætur (housing benefits) applications when your income and household size qualify. Rent changes during a term are limited; a landlord may seek a change after more than twelve months, and unresolved disputes go to the Housing Complaints Committee.

The written lease should list whether you rent a room or apartment, fixed or indefinite term, heat and electricity inclusion, deposit form, payment date, a condition report, and fire-safety notes. Ísland.is publishes the checklist landlords and tenants should complete at signing.

At move-in, create a written condition report with dated photos of walls, floors, kitchen, bathroom, windows, meters, and keys. Both parties should keep a copy. The same discipline at move-out is what protects your tryggingarfé when the landlord claims damage beyond ordinary wear.

Note meter readings and who holds which keys. For a furnished let, attach a furniture list. Vague "as seen" chats are weak evidence if the deposit later sits in dispute during the four-week claim window.