Do you want to protect the income from your home against unforeseen circumstances? Also known as "rent guarantee" and "security deposit", rent guarantee provides financial protection in case the tenant fails to meet their obligations, such as paying the rent and maintaining the property. This article provides clear guidance, with examples, on rent guarantee practices from a landlord's perspective.
What is a rental guarantee?
The security deposit is an amount equal to a maximum of 3 months' rent, as specified in the rental agreement. It is paid before the start of the tenancy, in practice before the keys are handed over. If the tenant does not pay it, you can cancel the contract. As a landlord, the rent deposit covers any failure to comply with the terms of the contract:
- Unpaid rents in relation to the agreed payment dates.
- Damage to the dwelling beyond normal wear and tear.
- No final cleaning at the end of the tenancy.
Rental guarantee laws
It is worth taking photographs of the property at the beginning and end of the tenancy so that any damage or wear and tear can be conclusively demonstrated when navigating the tenancy.
The rules for rent guarantees are laid down in the Act on the renting of residential accommodation(31.3.1995/481). They avoid disputes and ensure the rights of the landlord and tenant during and at the end of the tenancy.
The terms of the security deposit, such as the amount and payment period, should always be agreed in writing in the rental agreement to avoid misunderstandings.
The maximum amount of rental guarantee is the equivalent of three months' rent. No higher deposit may be required, even if the tenant agrees.
The rent guarantee may be used for unpaid rent, damage to the accommodation or failure to carry out the final cleaning.
The rental guarantee may not be used to cover wear and tear resulting from normal occupancy, in which case the landlord may not withhold part of the guarantee. Examples of normal wear and tear are light scratches on the floor or light soiling of the walls.
The rental guarantee may be used for these
The rent guarantee can only be used for certain expenses resulting from a breach of the rental agreement. If part of the security deposit is withheld, the landlord must provide the tenant with a clear written breakdown justifying the costs for which the security deposit will be used.
- Unpaid rentssome text
- The rent guarantee can be used to cover unpaid rent and other charges mentioned in the lease, such as water charges, if the tenant fails to pay them.
For example, a tenant has left without paying the last rent instalment and has also missed a water bill. The landlord can then cover the unpaid rent and water charges with a deposit and inform the tenant in writing.
- Damage to the dwellingsome text
- The rent guarantee can be used to cover damage to the home that goes beyond normal wear and tear. The damage must be intentional or caused by negligence.
For example, a tenant has damaged the kitchen cabinets so that they need to be replaced. The landlord can document the damage with photographs and use the security deposit to cover the cost of repairs. In such a case, it is advisable to include an estimate of the cost of the repair.
- Cleaning and maintenance costssome text
- If the tenant fails to carry out the final cleaning, the landlord can use the security deposit to cover the cleaning costs. However, the cleaning costs must be justified and documented.
For example, a tenant has left the property very dirty and it requires a thorough clean before the new tenant moves in. The landlord can ask the cleaning company for an invoice and withhold the amount as security.
The rental guarantee may not be used for these
Normal wear and tear is part of the rental activity and is the responsibility of the landlord. It refers to changes in the day-to-day use of the dwelling that are not caused by the tenant's neglect or carelessness, but by natural wear and tear over time. The rental guarantee may not therefore be used to cover such costs, such as the following.
- Wall fading and minor scratches: sunlight can fade. Small scratches are caused by moving furniture.
- Carpet and floor wear: areas where most people walk, such as door fronts and passageways.
- Ageing appliances and equipment: the performance of equipment deteriorates over time, regardless of use.
- Minor scratches and stains on kitchen and bathroom surfaces: minor stains and fading on tile surfaces or scratches on kitchen worktops are to be expected in long-term occupancy.
- Holes in the walls for boards and shelves: In many tenancies, it is considered normal for the tenant to be allowed to install a few nails or hooks for paintings.
- Wear on light switches and door handles: contact points in common use will wear out over time.
- Aging surfaces and paintings: painted surfaces, parquet or flooring may need updating over time, regardless of the tenant's use.
When will the rental deposit be refunded?
If the tenant has fulfilled their obligations, the security deposit will be repaid in full, usually within 2 weeks of the end of the tenancy. There are a few key steps to returning the security deposit in full, or in part in case of default.
- Inspection of the dwelling
- Check the condition of the dwelling at the end of the tenancy. This should be done thoroughly, comparing the current condition of the property with the photographs taken at the start of the tenancy and any written observations. Make a note of any damage to the dwelling beyond normal wear and tear.
- Documentation of possible damage
- If damage is found, the landlord should take photographs and record any findings to verify any arrests.
- Decision on repayment or forfeiture of security
- If the deposit is not used, the full amount will be refunded. If you make deductions for defaults, these must be justified and specified to the tenant.
For example: the landlord discovers that the kitchen worktop has been subject to considerable wear and tear during the tenant's use. He decides to withhold part of the €1500 deposit to replace the worktop and includes a calculation of the cost of the repair, e.g. €200. The tenant will be informed in writing and the remaining € 1300 of the deposit will be paid into his account.
- Refund payment period
- By law, the security deposit must be returned "immediately" after the end of the tenancy, and it is common practice to return the security deposit within two weeks. If the return is delayed without justification, the tenant may be entitled to interest on arrears.
- Calculation of interest on late payments
- Interest is calculated at the normal rate for late payments and starts to accrue from the end of the tenancy, so it is in the landlord's interest to have an up-to-date record.
Specific situations for rental guarantees
Termination of the rental contract before the agreed expiry date without just cause means that the landlord is entitled to compensation. The rental guarantee can be used to cover any losses incurred as a result, such as lost income during the rental period.
- For example: a tenant moves to another city in the middle of a fixed-term contract. The landlord uses part of the security deposit to cover one month's rent after termination if a new tenant cannot be found immediately.
The death of the tenant does not automatically end the tenancy, but the responsibility for the tenancy passes to the tenant's estate. In this case, the landlord must discuss the terms and obligations of the lease with the representative of the estate.
- For example: the tenant's estate gives notice of termination after the death of the tenant. The landlord announces the termination of the tenancy after the tenant's estate has given notice of termination of the tenancy.
In the event of a tenant's insolvency,the landlord should contact a legal adviser who can advise on how to use the rent guarantee or what other measures may be necessary.
- For example: the tenant's financial situation deteriorates and he or she misses several rent payments. The landlord uses the security deposit to cover the rent arrears and, if necessary, can seek additional compensation through the courts if the security deposit does not cover all the losses.
The security is transferred to the new owner when he or she inherits the rights and obligations of the landlord.
- For example:: The landlord sells the property to the new owner and the deed of sale states that the security is transferred to the buyer. The new owner ensures that the security deposit is properly transferred to and held by the new owner in the event of a breach of the terms of the lease.
Special forms of payment of rent guarantee
Paying a deposit in cash is the normal form of security, and the tenant pays it into the landlord's account before the tenancy starts.
- Suitable for working tenants with a stable income and the possibility to pay the deposit directly to the landlord.
The following can be used instead of a cash deposit.
A bank guarantee on behalf of the tenant and commits to pay the landlord if the tenant defaults on the obligations of the lease.
- Suitable for businesses or private tenants with an established credit rating, they can take advantage of a bank guarantee so they don't have to pledge money as security for the rent.
Personal guarantee means that a third party, such as a relative or friend, agrees to take responsibility on behalf of the tenant for any breach of the lease.
- Suitable for young people, students or first-time renters who do not have a large amount of capital available to pay the deposit.
A commitment can be granted in situations where the tenant is unable to pay the deposit and needs support to obtain rental accommodation. It is granted by the municipal social services or similar body.
Frequently Asked Questions
1. How much rent deposit can I ask for?
- The security deposit may not exceed the equivalent of three months' rent. By law, no higher security may be required.
2. Can I keep the security deposit if the tenant fails to do the final cleaning?
- Yes, you can use part of the deposit to cover cleaning costs. However, be sure to document the cleaning costs and inform the tenant of the deduction.
3. What should I do if the tenant does not pay the rent?
- The landlord has the right to use the rent guarantee to cover unpaid rent. You can then also seek additional compensation through the courts if the security deposit is not enough to cover the full amount.
4. Can the rent guarantee be used to cover the wear and tear of the dwelling?
- As a general rule, no, the rental guarantee may not be used for normal wear and tear. Normal wear and tear, such as minor scratching of the floor, is the responsibility of the landlord.
5. What documents do I need to hold a deposit?
- It is advisable to take photographs of the condition of the property at the beginning and end of the tenancy. If a security deposit is withheld, record the reasons for the withholding, such as cleaning bills or repair costs, and a written notice of the withholding to the tenant.
7. When do I have to return the security deposit?
- The security deposit should normally be returned within two weeks of the end of the tenancy. If the return is delayed without a valid reason, the tenant may be entitled to interest on arrears.
8. What to do if the tenant does not accept the withholding of the security deposit?
- Explain the reasons for the arrest and include evidence such as photographs and invoices.
- Indicate the contract terms that justify the withholding.
- Propose a partial arrest or other negotiated solution.
- If no agreement can be reached, suggest the help of a consumer dispute board or consumer advisory service.
- If the arrest is significant and other means have been exhausted, you can consider taking the case to the district court.
Looking for more reliable tenants for your home? Read more on Immodan's page for landlords and rent your property to businesses.
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