You just stumbled across the word rent deposit while finding your way through the move or reading the rental agreement? In Switzerland as well as in many other countries, it’s normal that tenants pay a rent deposit. But so how exactly does it work and what’s the difference between a rent deposit and security deposit insurance?
Rent Deposit as Security
The rent deposit is a degree of money that you transfer to a bank-account. When the tenancy has ended, you usually find the same amount back. The amount of money serves the renter as security. You may be very trustworthy, but the landlord probably had problems before. It happens, that individuals don’t want to cover additional costs or damages they caused. In those cases, the landlord may use the money to cover those things. Landlords are permitted to demand three months’ worth of rent (including additional costs) as a rent deposit.
What You Should Look out for
Don’t panic. The deposit that you transfer to your landlord can’t be utilized for their personal needs. For legal reasons, it’s needed that the amount of money isn’t transferred to the landlord’s private account. Instead, the amount of money is wired to a blocked account that is registered to your name. Why that’s important? Simple: In case the landlord becomes insolvent and the money is on their account, you’re never going to see the money again. If it’s on the blocked account under your name, however, then your landlord won’t be able to touch it even if he goes insolvent. Go to mietkaution for more details.
When depositing the money, it’s important to insist that each information is disclosed, including the name of the lender and the description of the account. In the event that you feel that something isn’t okay with the deposit, ask your landlord via registered mail to send you the facts of the lender account. It’s also possible to keep carefully the deposit in a bank of your decision and sending the qualification to the landlord. It’s better to agree on something you both are comfortable with.
You already need to transfer the deposit before the start of the tenancy. Be sure to pay promptly, otherwise the landlord can refuse to hand over the keys to the new apartment and that would cause irritating delays.
When Do You Get Your Money back?
Usually, you’ll get your cash back after handing in the apartment. By tenancy law, you’ll get the amount of money back after fulfilling the deposit. Which means that costs are paid and there are no more damages to be taken care of? If so, the pay-out should be possible within thirty days.
You’ve fulfilled all the requirements but didn’t have the deposit back? If so, you can change to the arbitration authority. It’s also possible to hold back for per annum. After this time, you can close the account and get the amount of money without the landlord.
Alternative: Rent Deposit without a Bank Deposit
At the end of the tenancy, you get the money back. But nonetheless, 90 days of rent is quite somewhat of money. In blend with the other costs that come with a move, that’s quite a major sum you’ll have to pay.
The choice to the lender deposit is the security deposit insurance. The difference is, that you don’t need to transfer hardly any money to a bank. Instead the insurance pledges to pay the damages in the end. There are quite a few providers from whom you can choose from. First, you’ll have to pay an entry premium. And from that moment on, you’ll pay a gross annual charge to the insurance (about 5 percent of the deposit). The insurance guarantees that the expenses will be paid to the landlord. The sum, however, must be reimbursed to the insurance. And you also won’t find the annual paid cost back neither. So even if it’s called security deposit insurance, it’s not the same as classic insurances.
Great things about the Security Deposit Insurance
- It’s fast: The transaction of the rent deposit can usually be achieved quickly.
- No burden of two rent deposits: Sometimes, the rent deposit of the old apartment continues to be sitting in the lender account and you simply already need to pay the deposit for the new apartment. Using the security deposit insurance, you tend to be more flexible to get the items you want for the new apartment.
- Beneficial for financially less strong people: If tenants don’t have the capital, security deposit insurance can help.
Disadvantages of the Deposit Insurance
- You pay more money: The rent association advises visitors to borrow money from friends/relatives instead of getting the security deposit insurance. The reason is that you pay more with the insurance. You pay gross annual fees and you have to pay the expenses if there are damages, even although insurance manages those costs initially.
- Long-term tenancy can become expensive: Particularly if you plan to stay in the apartment for a long period, it’s not worth getting security deposit insurance.
- Landlords can decide on the provider: Deposit insurances charge differently. In case the landlord prefers one provider, it’s possible, that you won’t get the cheapest provider.
Check Twice with regards to Money
You shouldn’t be casual about the transaction of the rent deposit. If there are mistakes, the amount of money can certainly vanish. Check all the documents properly and also read what’s written in the rental agreement about the rent deposit. Only sign after checking everything and then there’s nothing stopping you from getting the keys to the new apartment!