---

Deposit in tenancy law

Rights, obligations, and important practical tips for tenants and landlords

from
Elke Burger
Lawyer
Specialist in tenancy and residential property law

Give me a call: 0261 - 404 99 24
E-Mail:

In tenancy law, the deposit primarily serves to secure any claims the landlord may have against the tenant. It should be noted that there is no legal entitlement to a deposit; instead, a corresponding agreement must be included in the rental agreement. The parties are free to determine the amount and the secured claims, subject to the statutory maximum limit of three months' net rent. Exceeding this amount is generally not permitted and can be reclaimed by the tenant immediately. Only in exceptional cases, such as to prevent termination due to late payment, can a higher security deposit be demanded.

There are several payment options: The deposit can be paid in cash, in which case the landlord is obliged to keep it separate from their assets in order to minimize the risk of insolvency. The tenant has the right to pay the deposit in three monthly installments. Alternatively, bank guarantees, deposit insurance, or pledged savings accounts may also be considered. Each option has specific advantages and disadvantages that must be weighed up in each individual case, for example with regard to fees, access options, or security aspects.

The deposit is not static during the tenancy: if the landlord has legitimate claims against it, they can demand that the tenant replenish the security deposit. Failure to pay the deposit in full or in part may even constitute grounds for termination, including termination without notice. This legal significance makes it particularly important to properly agree and handle the deposit.

After the end of the tenancy, the landlord is obliged to repay the security deposit including interest as soon as he can reliably estimate the extent of his claims. There is no statutory deadline, but in practice a review and settlement period of approximately three to six months has become established. A partial payment is mandatory if only the operating costs are outstanding and no further claims are asserted. Claims for damages or for failure to carry out cosmetic repairs generally expire six months after the return of the rented property, which determines the time frame for retention.

Finally, it should be noted that if there are several tenants, the deposit may only be refunded jointly to all tenants. Without the express consent of all tenants, the landlord cannot make partial payments to individual tenants. This is often a point of contention in practice and should be considered when the contract is concluded. A legally sound rental agreement and transparent communication between the tenant and landlord can help to avoid conflicts later on.

The statements represent initial information that was current for the law applicable in Germany at the time of initial publication. The legal situation may have changed since then. Furthermore, the information provided cannot replace individual advice on a specific matter. Please contact us for this purpose.