What is to be considered for real estate deposit in Germany?

What does deposit mean?

The owner of a property can ask for a deposit to cover possible damage as well as to protect against possible loss of rent.
The deposit is a safeguard against possible damage, a for manoeuvre against possible damages.
The deposit payment is not legally mandatory, but is normally contractually required when renting real estate in Germany.

How much is the deposit?

A deposit of two net (Kaltmiete) monthly rents is customary; according to Section 551 of the German Civil Code (§551 BGB), a maximum of three net monthly rents is permitted.
For example, if a net monthly rent is € 1500, the legally permissible amount is a maximum of € 4500.

What can the deposit be used for?

The deposit is intended to alleviate the owner's risk of defaulted rent payments or sudden high repair costs.
Accordingly, it may only be used for damage such as:

• Missed rental payments
• Missed payments for water, heating, cleaning service etc. (variable cost, in German: Nebenkosten)
• bad maintenance, costs because of missing repairs
• Damage caused by the tenant through normal wear and tear

When and how is the payment to the landlord is to be made?

There are two possibilities:

• Deposit insurances, which guarantees the specified amount. The tenant has the advantage of not having to advance the quite high amount of the deposit, which is then tied to the owner.However, since deposit insurance is not advantageous for the owner, the owner has the right to reject it.
• Deposit payment via bank transfer. This is the usual practice. The rental contract regulates, when this must be paid, normal is before the start of the contract. However, it is also legally permitted to pay the deposit in three installments of the same amount.

How the deposit can be returned by the landlord?

First of all, it should be noted that the deposit is not the property of the landlord. The deposit may not flow into his private assets, nor may it be used as security for the owner against others.
In addition to the safe storage of the money, interest must also be paid.
The possible alternatives for investing must be agreed between landlord and tenant. Usually, the owner issues a savings book on which the money is safe, bears normal interest and has the necessary liquidity.
The deposit bears interest, minus any costs (account management fees) to be transferred back.

When is the deposit to be returned?

There is no legal deadline.
The landlord has a reasonable period of time in which he can check any damage to the property, as well as open payments (e.g. Nebenkosten). Analogous to various judgments, between 3 and 6 months is understood as appropriate. However, if the property is sublet, the examination period expires.
It is also important to know the deadline in which the tenant can claim the deposit back. If he “forgets” the demand, the claim expires after 3 years..

What to do if the landlord does not return the deposit?

If a repayment has not been made, it is advisable to inquire and set a reasonable deadline. Often there is no bad intention behind it, but often owners have several properties and overlook this closing activity.

If a delay is justified by the preparation of the utility bill (Nebenkostenabrechnung), only the expected partial amount may be withheld, but not the entire amount.

If the response is not appropriate or not at all, it is advisable to use a lawyer. The landlord is in default and then has to pay the costs incurred for the legal dispute.

Summary: How is the deposit handled in Germany?

• Provision according to the rental agreement
• The deposit does not become the property of the owner
• Repayment can take up to 6 months
• If the property is re-let, the repayment must be made immediately