Rental deposit in Germany (Kaution): cap, instalments, return

The cap

Under § 551 (1) BGB, if a tenant has to provide security for the performance of their duties, the security may be at most three times the rent for one month, leaving out service charges that are shown as a lump sum or as an advance payment. The base is therefore the net rent (Nettokaltmiete). Heating and other service charges shown as prepayments do not count.

A worked calculation (a formula, not a real lease): with a net rent of €900 and service-charge prepayments of €200, the cap is 3 x €900 = €2,700, not 3 x €1,100.

The cap covers the total security, whatever its form. If a lease asks for more, or for several kinds of security that together exceed three months’ rent, the excess is not allowed. The Code says an agreement to the tenant’s disadvantage is void (§ 551 (4)).

Paying in three instalments

If the security is a sum of money, the tenant is entitled to pay in three equal monthly instalments. The first is due at the start of the tenancy; the later ones fall due together with the next rent payments immediately following (§ 551 (2)). A lease that demands the full amount before you move in does not deprive you of this right.

If the tenant falls behind with the security by an amount equal to two months’ rent (again leaving out service-charge prepayments), the landlord may terminate for good cause without first giving a warning or a deadline (§ 569 (2a)). That makes it worth paying the instalments on time.

How the landlord must hold the money

Under § 551 (3), the landlord must invest a cash deposit with a bank at the rate usual for savings accounts with three months’ notice. The parties may agree on another form of investment. In both cases:

• the investment must be separate from the landlord’s assets;
• the income belongs to the tenant;
• the income adds to the security, so the deposit grows.

For a flat in a student or youth hostel, the landlord does not have to pay interest on the security. This is the only exception stated in the section.

If you want proof that the money is separate, ask the landlord in writing where it is held.

When the tenancy ends

§ 551 does not fix a number of days after which the landlord must repay the deposit. What the Code does set is a short limitation period for the landlord’s claims for damage to the home: they become time-barred after six months from the day the landlord gets the home back (§ 548 (1)). Similarly, the tenant’s claims for expenses or to remove installations also expire six months after the end of the tenancy (§ 548 (2)). In practice the landlord may retain a reasonable part of the deposit while the service-charge statement for the last year is outstanding. The Code on service charges (§ 556 (3)) gives the landlord 12 months after the end of the accounting period to send the statement, so the final settlement of the deposit and the last statement are often discussed together. See service charges.

Check your lease and any handover record, and keep written proof of the condition of the flat on moving in and out.

If the landlord changes

When a landlord sells the home after handing it over to you, the buyer steps into the tenancy rights and duties (§ 566 (1)). The former landlord stays liable like a guarantor for damage that the buyer causes by failing to meet the duties (§ 566 (2)); the Code releases the former landlord only if you are informed of the transfer and do not terminate at the first possible date. If you are in a sale situation, ask in writing who now holds your deposit.

Other kinds of security

§ 551 (1) speaks of “security” in general (Sicherheit), not only of cash, and the three-month ceiling is written for security as such. Paragraphs 2 and 3 deal only with a cash sum. If your lease asks for another form of security, read it against the ceiling and ask a tenants’ association.

Which professional to consult

A tenants’ association or a lawyer specialised in tenancy law can review a deposit clause and a final settlement. For questions about the condition of the home, a property valuer or a building expert can document defects. Payotte does not recommend individuals.