What is Kaution? Why is a deposit required when renting real estate in Germany? Storage and refund rules.
What is Kaution and why you need a deposit
Kaution in Germany is money pledged by the tenant upon signing the lease. The pledged amount covers potential damage to the landlord, for example if
- the tenant stops paying;
- something will break or deteriorate in the apartment;
- recalculation for utility bills will require an additional payment;
- other losses of the owner of the property due to the actions of tenants.
The essence of Kaution is to set aside an amount that is inviolable and guarantees the remitter compensation for losses if the tenant does not fulfill contractual obligations or is inadequate .
There is no German law that obliges the tenant to mortgage money when renting a house or apartment in Germany. This is a tradition. But finding a rental property without Kaution is incredible luck. Burgers don’t do that.
The reason is simple – owning a property involves costs, such as mortgage payments, financing repairs and maintenance of the property. The owner needs guarantees. If a tenant loses his job or suddenly disappears, the landlord will not receive rent. If it were not for Kaution, you would have to cover the cost of real estate from your own pocket.
The law defines the maximum allowable amount of the deposit – 3 monthly net fees excluding prepayment for communal services . The amount of cautsion is indicated in the contract.
It is important that the net lease value is stated in the contract. After all, the calculation of the maximum guarantee amount is associated with it. German landlords are sometimes cunning and do not prescribe utility bills separately to increase potential damage coverage. Just in case. Although it’s illegal.
In Germany, the owner of real estate has the right, under certain conditions, to raise the rental price of already rented housing. But you cannot ask for an increase in the deposit due to the increase in rent.
Overestimation of the cautsion size is permissible if the tenant himself proposed such an option during negotiations.
Let’s say a foreigner is looking for an apartment in Germany after moving on a work visa. The immigrant lives in a hotel, has not yet exchanged the national visa for a residence permit, the entry in SCHUFA is zero. Landlords will like such a tenant last. But the migrant can attach financial guarantee of a friend, colleague or boss – Bürgschaft, in addition to the cautsion. Confidence in potential tenants will increase. There will be more chances of finding a place to live.
It is also allowed to request more than the three-month rental price, the amount, if we are talking about an apartment intended for a disabled person.
Rules for keeping a deposit for housing
When concluding a contract for the lease of real estate in Germany, the size and form of adding Kaution are stipulated. Chosen from two options: German landlord
- receives money or
- a surety for the tenant is issued.
In case of cash payment, take a receipt for receipt of funds.
Having received a deposit, the landlord is not entitled to put funds into his own account . He cannot dispose of money at his own discretion. The law prescribes the rules for storing cautsion:
- the amount is deposited into a separate specially opened savings account or settlement account with a withdrawal period of 3 months;
- it is important to identify the purpose of savings in order to prevent the involvement of funds in the process of bankruptcy of the lessor or debt collection;
- the interest on the deposit must correspond to the standard rate when opening a savings account with a German bank;
There is an opinion that the account must be opened in the name of the tenant. This is not true. The owner of the home has the right to make a contribution for himself. But he is obliged to separate the tenant’s money from his own and not use the deposit for other purposes.
Interest income on the deposit belongs to the tenant, not the landlord.
The lessee has the right to ask for proof that the cautsion is stored in accordance with the law.
Illegal use of funds from an account opened for guaranteeing a rental property in Germany is a crime.
If the landlord does not respond to the requirement to provide proof of a properly executed deposit, the tenant may demand the deposit back or even not pay the net rent up to the amount of the cautsion. But as soon as the owner of the property has proven that the money is in the bank according to the established rules, the missed payments must be immediately paid in full.
The tenant is not required to pay the entire amount of the deposit at once. By law, it is allowed to split payments into 3 equal parts and pay in parallel with the lease.
The obligation to pay the first installment starts from the first day of the lease.
The breaking up of the pledge is prescribed by law. The owner cannot claim payment of the whole cautsion. It is also forbidden to make the possibility of full payment and the signing of an agreement dependent.
In practice, the promise to pay the full amount at once increases the chances of finding a home.
A surety instead of a cautsion
It is often difficult for an immigrant to pay the first rent and the entire cautsion immediately. The way out is a guarantee from a bank or an insurance company .
Instead of looking for the right amount, the tenant enters into a guarantee agreement that pays a small monthly or annual premium, and transfers money risk insurance to a third party.
If something went wrong and you need to pay damages, the landlord turns to the guarantor and immediately receives money to cover the damage. And then the guarantor collects the amount paid from the tenant.
In the normal course of events, the tenant has time to raise money in order to transfer the deposit later, for example, after six months, when the probationary period passes. As soon as the cautsion is introduced, the surety ends.
The surety is valid for as long as necessary, while the fees are paid. The standard rate is 5% per annum of the covered warranty.
Common forms of keeping a pledge in Germany
- Treuhandkonto is a trust account such as Tagesgeld. The landlord opens a savings account with a German bank in the name of the tenant, but gets full access. Money is deposited there – in cash at the bank or by money order. It is impossible to withdraw money without the knowledge of the home owner.
- Sparbuch is a passbook. The tenant creates a passbook marked Mietkautionskonto and pledges the invoice in favor of the owner. In fact, the landlord is given the right to access the account if the tenant defaults on the contract. The bank must make a note that it is impossible to withdraw money in any other way except after termination of the lease agreement – Sperrvermerk.
- Genossenschaftsanteil is a method of collecting Kaution when renting housing from building cooperatives and partnerships. Real estate construction and leasing firms choose Genossenschaft as their form of business. The tenant buys out a share in the cooperative equal to the amount of the pledge. So the company simultaneously receives guarantees and uses the money, and does not leave it lying in the bank. The profitability of cooperative units is often much higher than the standard German near-zero percentages.
- Private Mietbürgschaft – private guarantee. Instead of money, the landlord receives guarantees from a third party that in case of damage, the costs are covered by the guarantor. For example, parents vouch for the child. The landlord has the right to refuse if he does not trust the guarantor.
- Mietkautionsversicherung – risk insurance instead of collateral. The essence was explained above – instead of Kaution, the guarantee of the insurance company is transferred to the owner. The lessee pays the insurance premiums, the money can be paid later if one of the parties insists on this.
- Bankbürgschaft, Mietaval – the same guarantee, but guarantees are provided not by insurance, but by the bank. Option if the tenant has already accumulated savings and keeps money in the bank, but does not want to transfer funds to the landlord. Then the bank vouches for the client, receiving the savings on the account as a pledge.
How to pick up Kaution
By law, the landlord can keep the mortgaged money for 12 months . Time is given for recalculation of utility bills, which is made by service providers at the end of the year. Therefore, the homeowner holds a deposit in case it turns out that due to excessive consumption of water or heat, the former tenant must pay extra.
Other reasons for non-return:
- the repairs specified in the contract after the congress were not carried out;
- lease debt;
- property damaged, litigation is underway.
In some cases, when the showdown begins about the damage or debts, it is allowed not to return the cautsion even longer .
When moving to a new place of residence in Germany, you will have to take this factor into account – the deposit for the next home cannot be paid from the past, because the money will be returned only after a year.
The way out will be a surety. You will have to conclude a contract with insurance for a year until the pledged amount is returned.
The owner of the object has the right not to return the deposit if
- the debt has not been paid;
- the results of the recalculation for utilities related to rent have not been paid;
- after the exit, damage was found requiring repair;
- the results of the renovation do not satisfy the owner of the property.
To avoid problems with the return of the cautsion, it is recommended to inspect the dwelling together with the owner and sign the key transfer protocol.