Security deposit account: Who bears the costs?

A security deposit is a common practice when concluding a rental agreement to provide security for the landlord in the event that the tenant fails to meet their obligations. Although the amount of the deposit is usually invested to earn interest, in times of low or negative interest rates, costs can arise for the security deposit account. These can consist of account management and closure fees, as well as negative interest and custody fees. This article discusses the costs associated with the security deposit account and what one should keep in mind. Find out in our article which financial aspects need to be considered regarding a security deposit.

Why do costs arise for the tenant security deposit account

Everybody knows them, the Securities, which can be required when signing a rental agreement: This can be a Guarantee be or a Security deposit, it can Pledged savings balances and similar assets become. Let's stick to the most common form: the cash security deposit. In this case, a certain sum of money is handed over to the landlord, which is paid back after the tenancy ends. It serves as security for the landlord in case the tenant fails to meet their obligations that arise until the end of the tenancy. The amount of this deposit is agreed upon between the landlord and tenant, with three months' rent excluding utilities considered standard.

Usually, and this is prescribed by the law, the security deposit is invested to earn interest, meaning profitably. That was the case in the past and led to the sum growing through interest. This is also where the common term security deposit savings account (Kautionssparbuch) comes from.

However, in times of low or even negative interest rates, there are no gains, but rather losses. How are these to be recorded now? Unfortunately, there is (as yet) no clear and unambiguous legal regulation for this.

What costs are associated with the security deposit?

On the one hand, there is Costs for the maintenance and closing of the account. These are billed to the landlord by the credit institution. Here, case law has established that these costs can be deducted from the account, thus reducing the deposit. However, these are one-time or mostly minor costs.

But the so-called Negative interest rates and Custody fees apply for the entire term and can therefore add up. They are mostly billed annually. Since case law clearly states that account proceeds (interest) must be attributed to the tenant, conversely the same would apply to negative proceeds (costs incurred for the security deposit account). Whether the interest rate is positive or negative therefore falls within the tenant's risk sphere. However, this is not uncontroversial, and clear case law on the matter is still pending.

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How are the fees for the tenant security deposit account charged?

Any costs arising for the rent deposit account can either be billed to the landlord or charged directly to the respective deposit account. However, it is currently left to the landlord's discretion whether to bill the costs to the tenant on an ongoing basis or to deduct them from the deposit amount at the end of the tenancy.

If the landlord continuously deducts the costs from the security deposit account, a new problem arises: the deposit shrinks, but it must remain at the originally agreed-upon amount. Therefore, it is the tenant's duty to replenish it.

So what needs to be considered?

Due to the previously irrelevant situation where the security deposit account incurs charges instead of gains, it is advisable to choose a so-called when opening a new one. allocation of costs to be included in the lease agreement. This should state who bears the costs for the security deposit account and in what manner.

Since in the current situation it must be assumed that no profits will be generated on the security deposit account, but rather only fees for the rental deposit account will be booked, case law is urgently required to make a clear decision.