Security Deposits in Lower Saxony: Commercial Rental Guarantees

When renting private residential space, the tenant in Germany enjoys considerable protection through rigid legal regulations covering the investment and amount of the deposit. These restrictions do not exist in commercial tenancy law. For commercial landlords in Lower Saxony, this means maximum freedom when structuring contracts.

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1. Permissible Deposit Amount (No Limit)

For commercial properties, there is no statutory limit on how much deposit the landlord may demand (§ 551 BGB does not apply in commercial tenancy law!). While 3 cold rents represent the maximum in the private sector, it is common practice in the commercial sector in Lower Saxony, depending on the tenant's creditworthiness and industry risk, to secure much higher sums:

• Security deposits in the amount of 3 to 6 gross monthly rents are customary.
• Even higher deposit sums are legally permissible up to the limit of immorality (§ 138 BGB).

Since extensive tenant build-outs (e.g., safes, air conditioning systems, shop counters) often take place in commercial leases, the dismantling of which can cause immense costs, a sufficiently high deposit is extremely .

2. No Obligation to Pay in Installments

Commercial tenants have no legal right to pay the deposit in staggered amounts, like residential tenants, in three monthly installments. The landlord can demand that the full deposit amount be deposited before handing over the keys. If the tenant does not pay the deposit, the landlord generally has a right of retention to the keys and, under certain circumstances, the right to terminate without notice.

3. Forms of the Commercial Deposit

In addition to the classic cash deposit (cash payment/bank transfer), other security structures are often preferred in the B2B environment, which do not tie up the tenant's liquidity in the long term:

• Rental Guarantee (Bankbürgschaft): In Lower Saxony, the most common form of security. The landlord should absolutely demand a form "on first demand" in the contract (Attention, this must be negotiated individually; in general terms and conditions, a guarantee on first demand is often invalid!).
• Pledging of a Custody Account / Savings Account
• Transfer of Ownership by Way of Security: Of business and operating equipment. However, preferential rights of other creditors (suppliers with retention of title) are often a danger for the landlord here.
• Letter of Comfort / Corporate Guarantee: The parent company is liable for the rental payments of the renting regional GmbH subsidiary (often seen in retail in downtown areas like Hanover).

4. Insolvency-Proof and Interest-Bearing Investment

By law, the landlord has no obligation to invest a commercial deposit at interest and separately from their own assets. However: If the tenant has provided a cash deposit and no separation or interest obligation was agreed upon in the contract, the tenant bears the full risk of the landlord's insolvency. If it is negotiated in the contract that the deposit is kept separately in a trust account, the obligation to pay interest also lapses – unless this is explicitly agreed.

5. Return and Settlement

For the review of the deposit after the end of the contract - as in residential space - a reasonable review and reflection period applies. Experience shows that in business, this often extends to at least three to six months, sometimes longer if complex dismantling work is necessary. The same applies here: If the landlord forgets to claim damages to the property within the strict 6-month period (§ 548 BGB) after returning the rooms, all claims for compensation are statute-barred. They can then no longer satisfy themselves from the retained deposit account from these items for damages (Counter-exception: offsetting of unpaid, unbarred rent or operating cost arrears).

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