Security Deposits in Lower Saxony: Regulations for Landlords

The regulations regarding the rental security deposit (Mietsicherheit) in Lower Saxony are based on the uniform national provisions of the German Civil Code (§ 551 BGB). Violations of these provisions can lead to the invalidity of the deposit agreement and claims for damages.

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Permissible Deposit Amount

Landlords in Lower Saxony may demand a maximum deposit of three months' net cold rent as security. Advance payments for operating costs (ancillary costs) are not taken into account in this calculation.

• This applies equally to furnished and unfurnished living space.
• If the rent is increased during the tenancy, the landlord may not demand a subsequent increase in the once agreed deposit.

Payment Modalities

It is for landlords to know that tenants have the legal right to pay the deposit in installments:

• The deposit may be paid in up to three equal monthly installments.
• The first installment is due at the beginning of the tenancy (not upon signing the contract, but at the start of the rental period).
• The subsequent installments are due together with the immediately following rent payments.

Cash payments, bank transfers, pledged savings books, or bank guarantees (rental deposit guarantee) are permitted. However, the landlord generally has no claim to a specific form of deposit in the absence of a contractual agreement.

Obligation for Insolvency-Proof Investment

The landlord has strict obligations regarding the investment of the deposit:

• Separate Safekeeping: The deposit money must strictly be invested separately from the landlord's private and other business assets.
• Insolvency Security: The account must be an open trust account (Mietkautionskonto). This protects the deposit in the event of the landlord's potential insolvency.
• Interest: The deposit must be invested with a bank at the standard interest rate for savings deposits with a three-month notice period. The accrued interest belongs solely to the tenant and increases the deposit amount. Even in the case of negative interest rates from the bank, the deposit amount must not be reduced.

Retention and Offsetting

During the ongoing tenancy, the landlord may not access the rental deposit for disputed claims. Only after the end of the tenancy and return of the property does the deposit serve to satisfy justified claims:

• Outstanding rent payments
• Additional payments from the operating cost statement
• Costs for unperformed cosmetic repairs (if legally effectively agreed upon in the contract)
• Compensation for damages to the apartment

Statute of Limitations for Claims

Landlords must act diligently: While claims for damages due to alteration or deterioration of the rented property generally become statute-barred under § 548 BGB six months after the apartment is returned, a significant court ruling (BGH, July 10, 2024, VIII ZR 184/23) clarified that landlords can still offset valid claims that arose within this 6-month period against the security deposit, even if the offsetting declaration is made after the 6-month limitation period has expired. This means the landlord retains the ability to utilize the deposit for existing, valid claims beyond the typical limitation period for new claims.

Deadlines for Repayment

The BGB does not specify an exact deadline for the repayment of the deposit after moving out. German case law grants the landlord a reasonable period for consideration and examination:

1. Regular Examination Period: Usually, three to six months is considered reasonable to assess damages and settle the deposit.
2. Partial Retention for Ancillary Costs: If an outstanding operating cost statement is still pending – for example, for heating costs – the landlord may legally retain a reasonable partial amount of the deposit (e.g., the amount of the expected additional payment) beyond this period. The remaining amount must be paid out without delay.

The payout includes the interest accumulated over the term.

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