Withholding the deposit — when may you do this really?
Eighteen months after the end of a tenancy it usually arrives: the demand 'When do I get my deposit back?'. We explain when you may retain how much, which deadline applies — and which typical landlord mistakes become costly in court.
How high may the deposit be?
Maximum 3 months' net rent (excluding charges) (§551(1) BGB) — excluding operating costs. The tenant may pay the deposit in 3 equal monthly instalments (§551(2) BGB). You must hold the deposit separately from your own assets and invest it at the customary market interest rate (in practice: a separate savings account in the tenant's name or an interest-bearing account with a pledge notation).
When may you withhold the deposit?
Three circumstances justify withholding:
- 1. Outstanding rent payments (incl. pro-rata final month)
- 2. Outstanding service-charge back-payments from the current or a past statement
- 3. Damage that goes beyond normal wear and tear (e.g. broken sanitary fixtures, burn marks, missing renovation where contractually owed)
What does NOT count: normal wear and tear (worn paths in the carpet, faint marks on walls), decorative repairs where the clause in the tenancy contract is invalid (90% of all pre-2003 clauses!), and repairs that you, as the landlord, would have to bear anyway.
How long may you keep the deposit?
There is no rigid deadline— but the German Federal Court of Justice (Supreme Court) allows a reasonable period for settlement/review, typically:
- Immediately after move-out: obvious damage + outstanding rent
- 3–6 months: for the normal final settlement
- Up to 12 months: where the current year's service-charge statement is still outstanding
- At most: until the final service-charge statement has reached the tenant + approx. 1 month for review
If you withhold the deposit for longer without justification, the tenant can sue for repayment — and you may have to pay their legal costs + default interest.
Sample deposit statement
- Deposit paid: 1.500 €
- Aufgelaufene Zinsen (3 Jahre × 0,5 %): 22,50 €
- Withholding for outstanding utility costs previous year: -€180
- Withholding for damage to the basin surround (per estimate): -340 €
- Anticipated retention for the current service-charge statement (estimate): -200 €
- Immediate payout to the tenant: 802.50 €
- Rest (ca. 200 €) nach Endabrechnung in 4 Monaten
Important: you must account transparently. Send the tenant a written breakdown with receipts/cost estimates for each withholding. A blanket statement such as "We are withholding €800" is not permissible.
Common landlord mistakes
- Deposit held in your own account → potential criminal breach of trust under §266 of the German Criminal Code (StGB)
- Demanding decorative repairs even though the contract clause is invalid → the tenant sues and wins
- Flat-rate damage withholdings with no estimate → the claim is unfounded
- Withholding the deposit for more than 12 months without a statement → default interest from month 13
- Forgetting to pay out interest → the tenant can claim it later
How Rentprime helps you
Rentprime has its own Kautions-Modul: you record the deposit + the investment account, the system automatically calculates the accrued interest, reminds you of the settlement obligation when the tenant moves out, and generates a legally sound deposit statement including all withholding items + cost estimates as a PDF — ready to send directly to the former tenant.