If you are currently looking for an apartment and have noticed with displeasure that many advertisements have very high rental deposits? Ask yourself if taking out a rental deposit insurance policy makes sense in your case to avoid paying the deposit? Who can blame you?
Rental deposits have been the absolute standard in Germany for some time now when renting residential properties in all price ranges. They are intended to provide the lessor with financial security. But what exactly does a rental deposit actually secure? In what amount is a rent deposit useful? And who should consider rent deposit insurance?
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The fact is that since the naturalization of rental deposits, a whole cosmos of modifications and extensions has been formed on the subject of deposits. Enclosed is an overview that includes everything you need to know about rent deposits and how to handle them with rent deposit insurance.
What is a rental deposit and why do you need it??
The rent deposit or rent security, as it is called in the technical jargon, is a one-time financial payment that a tenant transfers to the future landlord at the beginning of a tenancy 1 Mieterbund – https://www.tenant association.en/lease-right/lease-right-a-z/key-words-to-the-lease-right-m/lease-deposit.html .
Rent deposits are not legally stipulated, but are common practice in the vast majority of German rental advertisements. Before the lease is signed, an agreement must be reached between the prospective tenant or. the future tenant and the landlord reach an agreement on the configurations of the deposit. The landlord can not enforce a deposit, but can enforce it in court if necessary.
Deposits can differ, among other things, in the amount and method of payment. In addition, the conclusion of a rent deposit insurance or rent deposit guarantee can be considered. Rent deposit insurance prevents the tenant from paying the rent deposit. Instead, the tenant only has to pay a small insurance premium for the rent deposit insurance.
The primary purpose of a rental security deposit (or rent deposit) is to protect the landlord from the tenant in the event of financial damages that..
- damage to the rental property caused by wilful destruction or long-term wear and tear, or
- by missing payments of the monthly cold rent or the additional expenses arise.
In individual cases, the rent deposit can also be used to offset legal costs associated with the tenancy.
Everything tenants and landlords need to know about rental deposits
If tenants and landlords are about to sign a contract, they should be aware of a few things regarding the details and implementation of a rent deposit. Everything that tenants and landlords need to know from the fixing to the repayment of the deposit:
The payment of the rent deposit
Although it has become common practice that the rent deposit is required at the latest at the beginning of the rental agreement, this requirement does not have a legal basis.
In fact, according to the payment agreement, the rental deposit can be paid in full even after the start of the rental contract. If tenants decide to make a one-time security deposit payment, it becomes due with the first month's rent. If, on the other hand, tenants decide to pay the deposit in up to three installments, only the first installment of the rent deposit payment is due at the start of the tenancy for the time being. The second and third installments of the rent deposit are each due with the next payment of the coming month's rent.
If a tenant fails to pay the rent deposit despite an explicit agreement in the lease, this may constitute grounds for termination. If the default exceeds the amount of two months' cold rent, the landlord is entitled to perceive the default as an extraordinary reason for termination and to terminate the tenancy without notice.
If the tenant has taken out a rental deposit insurance policy and the landlord agrees to it, no deposit payment is due. Instead, the insurance company guarantees payment of the deposit in the event of a claim.
The amount of the rent deposit
If a landlord decides to set a rent deposit, he must observe some restrictions and rules when setting the amount of the rent deposit. Arbitrarily high deposits to discourage tenants are therefore not feasible or. permissible.
In accordance with the legal basis, the landlord may demand a maximum of three times the monthly net cold rent as a rent deposit. Say: If the net cold rent for a rental property is 500€ per month, the deposit may not exceed 1€ per month at the time the lease is signed.500€ include. The tenant can pay this in up to three installments a 500€, as described above.
However, if the landlord, in the tenant's ignorance, has demanded a higher deposit amount than is actually permissible, the tenant may reclaim the overpayment and, if necessary, assert his claim in court.
By the way: The rent deposit cannot be adjusted after the contract has been signed. While the net cold rent can be adjusted, the deposit is not affected by this in any way. This always remains at the amount agreed upon at the conclusion of the contract. The demand for additional payments beyond this amount is not permitted.
The payment of the rent deposit
The claim of the rental deposit can be settled in several ways following the conclusion of the contract. The most common payment methods include payment by cash deposit, pledging the rental deposit through a rental deposit account, assignment of security and rental deposit guarantee. Enclosed are the most important details regarding the respective payment procedures:
- The cash deposit: The cash deposit is the most common form of payment of rental deposits. This is a simple cash payment or transfer of the rent deposit by the tenant to the landlord. The landlord is then required to manage and secure the deposit independently of his own assets. However, there is no protection against abuse against the landlord when paying a cash deposit.
- Pledging the rental deposit via a rental deposit account: A pledge of the rent deposit usually proceeds as follows. The tenant and landlord agree to pledge a certain amount of money, and the tenant deposits this money in a savings account such as a rental deposit account or a similar investment method. The tenant then pledges the right to the savings claim to the landlord, so that the landlord has access to it over the term of the lease agreement.
- The security assignment: if a tenant does not feel able to pay the deposit without touching liquid and non-liquid assets before signing a lease, he can also negotiate a security assignment to the landlord. A security assignment consisting of business shares, investments in shares, bonds, cryptocurrencies and comparable or property in the amount of the deposit will not be touched if it is not necessary. If no problems arise during the tenancy, the tenant does not have to touch any goods. However, if problems arise, the lessor may access the assigned goods and, if necessary, liquidate them to settle damages.
- The rental deposit guarantee: A rental deposit guarantee, sometimes also referred to as a rental guarantee, involves a third party in the payment of the rental deposit. This is usually a credit institution, an insurance company or a third party. The third party acts as a guarantor and guarantees the payment of possible debts on the part of the tenant. The exact configurations of the rental deposit guarantee are discussed between the contracting parties.
The rental deposit insurance
A rent deposit insurance is worth considering in several situations. First and foremost, tenants take out a rental deposit insurance policy in order to obtain a rental deposit guarantee through it. As described above, the insurance company acts as a third party or. as a guarantor for the rent deposit on.
If a tenant takes out a rental deposit insurance policy, he or she saves paying the cash deposit and instead causes the landlord to be covered by a surety bond from the insurance company. Even after taking out a rental deposit guarantee, he only has to pay a monthly contribution to the insurance policy taken out. This typically ranges from 3% to 5% of the total security deposit per year.
If no claims are made by the landlord during the tenancy, the tenant therefore only has to pay the low contribution to the rental deposit guarantee, but at no time does he have to raise the financial resources for the rental deposit.
Should the landlord wish to make a claim during or at the end of the tenancy, they will report this to the insurer. The majority of rental guarantees are designed as a guarantee on first demand. A rental guarantee on first demand allows for payment of damage amounts within the deposit amount without investigation. Subsequently, the tenant must settle the difference with the insurer.
Rental security deposits can usually be canceled at any time, provided that the consent of the tenant and the landlord has been obtained. The insurer will need proof of consent or the tenant's agreement. the guarantee certificate in the original.
The repayment of the rent deposit
After termination of the tenancy, the repayment of the rent deposit must be verified by the acceptance of the apartment. Any damage or missed payments are settled with the help of the deposit. Any surplus must then be paid to establish the landlord's claims.
There is no set time limit for the return of the rental deposit, as the landlord must examine a number of factors to be certain of the deposit's settlement. A waiting period of three to six months is therefore not uncommon. Up to one year can elapse for a landlord under the right circumstances (e.g. B. outstanding operating costs statement) leave time.
If the tenant has not received a refund even after this time, he has a good chance of getting his deposit back by taking legal action. In any case, however, tenants should have some patience when it comes to repayment. However, you can also agree on a repayment period with the landlord and stipulate it in the lease agreement so that you can be sure of repayment.
If a surety bond from the rental deposit insurance company has replaced the cash deposit, no repayment is due either. As soon as the tenancy ends, both parties terminate the rental deposit insurance in agreement, provided there are no more outstanding claims.
Rental deposit insurance – knowledge is power.
What should tenants take away from this overview to the rent deposit? The rental deposit is by no means an object of the rental contract stipulated by law. Tenants always have room to negotiate the terms of the deposit, such as the method of payment, the payment interval, the amount and repayment. Tenants should also use this if necessary. Rental deposit insurance allows the tenant to bypass the deposit payment itself.
What should landlords take away from this overview on rent deposits? Negotiating the security deposit can take many forms, but it is capped at the amount of three net cold rents without a specific agreement. Failure to make the agreed deposit payment may entitle the tenant to terminate the contract. A rental deposit bond allows you to get your deposit paid out as quickly as possible in the event of a claim. All agreements should be recorded in a contract, because they are not supported by law without exception and in case of emergency would still have to be enforced in court.