Kaution in English: the German rental deposit explained

Q: What happens if you don’t pay the deposit?

Non-performance of rental guarantee obligations is governed by Section 569 paragraph 2a BGB. Failure to pay the deposit gives the landlord the right to terminate the tenancy agreement without prior notice. However, there are some nuances: The payment of a deposit must be stated in the tenancy agreement. Your deposit arrears have reached two months’ basic rent (Kaltmiete, i.e. without service charges). The reason for the termination of the contract must be stated. If you pay the deposit in full after the termination, but no later than two months after the eviction claim has been served on you, the termination becomes invalid.

Updated:
05.10.2026

Deposit — the security deposit (Kaution) paid when renting a home in Germany.

If you are planning to rent a property in Germany, it is important to keep the Kaution in mind — the security deposit for a rented home. By law you are not obliged to pay it, but without it finding a flat is practically impossible. It is used to protect the landlord and can cover:

Material damage (damage to the flat, etc.)

Non-payment of rent

Non-payment of utility bills

In this article, we will examine how the Kaution works in Germany, what legal regulations and practical aspects exist regarding the payment and return of the rental deposit, as well as providing useful tips for tenants.

Nebenkosten — utility and service costs, for example cold water, refuse collection, cleaning of communal areas. Heating, electricity and gas are paid for separately and are not included in the Nebenkosten.

Kaltmiete — rent excluding utilities (Nebenkosten).

Warmmiete — rent including utility bills (Nebenkosten).

According to Section 551, paragraph 1 of the BGB the Kaution cannot amount to more than 3 months’ rent (excluding utility bills — Nebenkosten), the so-called Kaltmiete (“cold rent”). Even if the landlord fixes the utility charges and includes them in the contract, stating the Warmmiete (“warm rent”) cost in it, they must deduct the cost of the utility bills for the purpose of calculating the deposit. In the event of a rent increase, the deposit amount remains the same unless otherwise specified in the contract.

How do I pay the deposit?

Moving into a new flat is often expensive enough as it is: transporting belongings, buying things that are missing, and so on. And on top of that, you have to make 4 payments all at once.

If you cannot or do not want to pay that much money to the landlord in one go, there are a few options:

Single transfer or payment

You can pay the deposit either in one single payment or in three instalments. The first instalment must be paid at the same time as the first month’s rent, and the remaining ones on the payment dates for the subsequent months (Section 551 paragraph 2 BGB). But bear in mind that you’ll most likely not get it back straight away once you’ve moved out. More on this at the end.

In the event of cash payment, the landlord must put your money into a deposit account separately from their other accounts (Section 551, paragraph 3 of the BGB). This account cannot be terminated for the duration of the lease agreement, and you are entitled to the interest accrued on it. However, the interest rates on such accounts are very low: according to a Finanztip sample from October 2025, they are no more than 0.5 per cent per annum, and at some banks the rate is zero. Plus a one-off account opening fee, usually between 10 and 75 euros.

Mietkautionsversicherung (rent deposit insurance).

In this case, you take out insurance and therefore do not have to pay a deposit. Instead, you pay a monthly or annual insurance premium, the amount of which depends on the deposit amount.
As a rough guide: for a deposit of €2,400, the annual premium with major insurers is approximately €103–€113, that is around 4.3 to 4.7 per cent of the deposit amount per year (Finanztip sample, October 2025). Over five years of renting, this comes to more than 500 euros, which are non-refundable — unlike the deposit itself. The landlord receives a guarantee certificate from the insurance company as proof that the deposit is secured. Certificates are usually issued within 24 hours, and in some cases can be arranged online. You must agree with the landlord that you will take out an insurance policy instead of paying a deposit.

Prerequisites for concluding the contract:

Minimum applicant age: 18 years
The rental property is located in Germany
Use of rented property for private residential purposes
Valid bank details for SEPA Direct Debit (automatic debit from a bank account)
Good credit history

Additional information for concluding the contract:

Compare quotes and take out Mietkautionsversicherung online

Compare

Mietaval (rent guarantee) or Bürgschaft (surety)

A Mietaval – a rental deposit guarantee – is also an option. In this case, the guarantor undertakes to cover any damage or debts of yours that may remain unsettled after the tenancy ends, but only up to the deposit amount agreed in the contract. Such a guarantor can be a bank. You will not need to pay the entire deposit amount, but rather make a monthly or annual payment for the guarantee, and in some cases an additional service fee. Currently, few banks offer such services. Moreover, it costs more than a Mietkaution (cash deposit): for the same deposit amount of €2,400, the annual fee starts at €96. In the case of a private surety (Kautionsbürgschaft), for instance from parents, the landlord will have to check the guarantor’s financial standing. The arrangement of a Mietaval and Bürgschaft must also be agreed upon with the landlord.

What happens if you don’t pay the deposit?

The consequences of not providing the deposit are set out in law (Section 569 paragraph 2a BGB). Failure to pay the deposit gives the landlord the right to terminate the tenancy agreement without prior notice. However, there are some nuances:

The payment of a deposit must be stated in the tenancy agreement.
Your deposit arrears have reached two months’ basic rent (Kaltmiete, i.e. without service charges).
The reason for the termination of the contract must be stated.

If you pay the deposit in full after the termination, but no later than two months after the eviction claim has been served on you, the termination becomes invalid.

What happens to the deposit when the property changes ownership?

In the event of a change of owner or a change of landlord, the existing lease agreement remains in force without changes (§ 566 BGB), and also the new owner cannot increase the rental deposit. Its amount can only be changed if you agree to such changes or the landlord terminates the agreement and a new tenancy agreement is concluded. You have the right not to agree to a subsequent increase in the rental deposit or even a new agreement for the existing flat.

The deposit itself passes to the new owner together with the tenancy (§ 566a BGB). If the new owner does not return it when the tenancy ends, the previous landlord must repay it.

How do I get my deposit back if I paid in cash?

You will get your deposit back after you move out and hand over the keys. The landlord may deduct losses from the deposit, but only with a legal right to do so. For damage to the flat, the landlord can demand money straight away; you are only entitled to a deadline to put things right if decorative repairs (Schönheitsreparaturen) have not been done.

To receive a deposit refund, we recommend writing a request immediately after moving out of the flat. The request should state that at the time of handing over the flat no defects were found or that they had been rectified.

Getting your deposit back often takes a while, even if the tenancy ended without any problems. The law sets no fixed deadline for the landlord to return it. Courts consider a few months reasonable, and in complicated cases more than six; while the service charge statement is still pending, part of the deposit can be held back for longer. People often quote six months, but that is the limitation period for compensation the landlord can claim from you for damage to the flat after you move out (according to Section 548 of the Civil Code (BGB)), not a deadline for returning the deposit. You will also receive the interest earned while the deposit was held.

In which cases can the landlord withhold the deposit?

If the settlement of operating costs is still ongoing, the landlord may also withhold part of the deposit for more than six months. However, they cannot keep the entire deposit.

If the landlord discovers damage or defects in the flat after the end of the rental period, or if there are unpaid rent or utility bills, they have the right to withhold part of the security deposit to compensate for these losses or debts. The landlord must clearly explain the reasons for withholding the deposit and use the funds only for specific purposes. In the event that the tenant has not paid all additional expenses by the end of the tenancy, the landlord has the right to withhold part of the deposit until the debt is paid in full.

However, normal wear and tear is no reason for a deduction from the deposit. In this situation, it is important to determine what is subject to compensation and what has no bearing on the deposit deduction.
If you experience problems with the return of your deposit or the landlord does not refund it in full, we recommend seeking legal support from a local tenants’ association or a law firm specialising in tenancy law. Take into account potential costs in the event of filing a claim. If you have legal expenses insurance, check to what extent it covers the costs of a dispute regarding the refund of the deposit.

If the idea crosses your mind not to pay the rent for the last few months after giving notice to move out and thereby “take back” the deposit, know that this is a bad idea, it is not permitted, and you could be sued.

Legal expenses insurance will help in the event of the wrongful retention of a deposit and other problems

More details

What the landlord may and may not withhold

This is the main source of disputes when returning a deposit. German courts have analysed almost all standard situations — below is the Federal Court of Justice’s (BGH) position on each one.

Situation	Is it possible to withhold	Basis
Rent arrears	Yes	The direct purpose of the security
Utility costs not yet settled	Partly. Only an amount justified by the statements for previous years may be withheld, but not the entire deposit	Federal Court of Justice (BGH), 18 January 2006, VIII ZR 71/05; Federal Court of Justice (BGH), 20 July 2016, VIII ZR 263/14
Damage to the apartment that became known late	Yes, the cost of the repairs can be taken into account, even if the claim itself is time-barred	Federal Court of Justice (BGH), 10 July 2024, VIII ZR 184/23
Painting work that has not actually been carried out	Yes, a quote is sufficient	BGH, 10.05.2022, VIII ZR 277/20
Normal wear and tear (scuffs, marks left by furniture)	No. Wear and tear is covered by the rent	§ 538 BGB
Parental guarantee over three cold rents	Invalid in respect of the excess	§ 551(4) of the German Civil Code (BGB)

Cosmetic refurbishment: when it isn’t necessary at all

The most frequent and most expensive dispute. The Federal Court of Justice’s key rule: if the flat was handed over to you unrefurbished, you are not obliged to return it refurbished — the relevant contract clause is entirely invalid (BGH, 18 March 2015, VIII ZR 185/14). This rule also applies when the condition of the flat was agreed with the previous tenant (BGH, 22 August 2018, VIII ZR 277/16).

Other invalid terms of the contract:

A rigid decorating schedule (“the kitchen every three years, the rooms every five years”) — invalid (BGH, 5 April 2006, VIII ZR 178/05).
Compulsory repairs on departure regardless of the condition of the flat — invalid (BGH, 18 February 2009, VIII ZR 166/08).
A requirement to paint the walls a specific colour during the tenancy — renders the entire provision on cosmetic repairs invalid (BGH, 20 January 2010, VIII ZR 50/09).
Pro-rata payment for future repairs in the event of early departure (Quotenabgeltungsklausel) — is invalid in principle (BGH, VIII ZR 242/13).
Sanding and varnishing parquet flooring does not constitute cosmetic repairs at all (BGH, 13 January 2010, VIII ZR 48/09).

An important point regarding the burden of proof: The tenant must prove the condition of the flat upon moving in (BGH, 30 January 2024, VIII ZB 43/23). The practical implication of this is that the handover report, complete with photographs and the date, should be kept for the entire duration of the tenancy and for a further year thereafter.

And the flip side: if you move into an unrenovated flat, you have the right to demand repairs during the tenancy — but you will have to pay half (BGH, 8 July 2020, VIII ZR 163/18 and VIII ZR 270/18).

How to get your deposit back faster: step-by-step guide

Handover report upon departure. Drawn up in duplicate, signed by both parties. The phrasing “apartment accepted without remarks” closes off most future claims regarding damage.
Photos and videos. Photograph all the rooms, meter readings and keys. The timestamp on the photos is your main evidence.
Written demand immediately after departure. Please specify the key handover date, the account number for the transfer, and a reasonable response time. An email is fine, but a registered letter carries more weight.
After six months — a reminder with a reference to § 548 BGB. The law sets no deadline for returning the deposit: courts consider a few months reasonable, and in complicated cases more than six. After six months the landlord’s short limitation period for compensation claims also runs out.
If they are withholding money because of utility bills — demand the return of the part that will obviously not be needed. The landlord has no right to withhold the entire deposit until the final settlement.
Interest. The interest on the deposit account belongs to you and increases the amount of security (§ 551 para. 3 BGB). Demand that the deposit be returned with interest.

What else is important to know

Question	Answer
Is the security deposit protected in the event of the landlord’s bankruptcy	Yes — if the money is kept separate from the landlord’s own assets, as required by § 551 Abs. 3 BGB. This is the key reason to insist on a separate account rather than a transfer “to the landlord’s personal account”
Any deviating clause in the contract	A term that puts the tenant at a disadvantage compared to Section 551 of the BGB is void (Section 551(4) of the German Civil Code (BGB)). The clause “deposit – four monthly payments” is simply void to the extent that it exceeds this limit.
Commercial leases	For non-residential premises, Section 551 of the German Civil Code (BGB) does not apply (Section 578(2) of the German Civil Code (BGB) does not include it in the list). There is no ceiling of three months’ rent, no right to pay in three instalments and no obligation to keep the money separate – everything is determined by the contract.
Change of ownership	The tenancy agreement transfers unchanged (§ 566 BGB). The new owner has no right to demand a higher deposit. The deposit passes to them as well (§ 566a BGB); if they do not return it, the previous landlord must.
Non-payment of the deposit	Gives the landlord the right to terminate without notice once the deposit arrears reach two months’ rent (§ 569 para. 2a BGB). The termination becomes invalid if the deposit is paid in full within two months of the eviction claim being served on you.

Deposit insurance or cash: which is better

The comparison is simple and almost always yields the same answer.

	Funds in a deposit account	Deposit insurance
What you pay	The deposit itself is refundable	A fee of approximately 4 to 5 per cent of the deposit amount per year — non-refundable
Your money is frozen	Yes, for the entire rental period	No
If the landlord makes a claim	You deal with the landlord directly; the money stays with the bank for now	The insurer pays the landlord, and then claims this amount back from you — including when you were not liable for the damage
When it makes sense	Whenever there is money	When there’s simply no spare money for a deposit or it’s needed more for the move and furnishing the new home.

Please note the recourse mechanism: deposit insurance is not protection for the tenant but a guarantee for the landlord. If you are able to pay a deposit in cash, consumer organisations recommend this option.

What else to read

Home contents insurance — what is covered during the move and in the new apartment
Private liability insurance — covers damage to the rented flat for which you are responsible
Legal expenses insurance — the “property rental” section covers disputes over the return of the deposit
Buildings insurance — for property owners
Termination of a contract in Germany

Sources

§ 551 BGB — tenancy deposit: gesetze-im-internet.de
§ 548 BGB — short limitation period: gesetze-im-internet.de
Section 566 BGB — change of ownership: gesetze-im-internet.de
Section 566a BGB — deposit on change of ownership: gesetze-im-internet.de
§ 569 BGB — termination for failure to pay the deposit: gesetze-im-internet.de
§ 578 BGB — what rules apply to non-residential premises: gesetze-im-internet.de
§ 538 BGB — normal wear and tear: gesetze-im-internet.de
Federal Court of Justice — search through decisions: bundesgerichtshof.de
Verbraucherzentrale (consumer advice centre) — tenants’ rights: verbraucherzentrale.de