Mietkaution Handbook: How German Landlords Take, Hold, and Return a Deposit

The Mietkaution looks simple on the surface. A landlord asks for up to three months of cold rent, holds the money, and gives it back when the tenant leaves. In practice, almost every German landlord I have seen handle their first deposit gets at least one detail wrong. They hold the money on their own current account. They forget to set up a separate Kautionskonto. They keep the interest. They withhold the full deposit for a tiny disputed item. They take six months to refund and then find out a court would have ordered immediate release.

This guide walks through the law (§ 551 BGB), the practical handling, and the four scenarios where you can legally withhold money.

What you can take: the 3-month-rent cap

The maximum deposit allowed is three months of cold rent (Nettokaltmiete). Three things to underline:

1. Cold rent only. Heating, water, Hausgeld pass-throughs, and other Nebenkostenvorauszahlungen do not count toward the base. If the cold rent is €1,000 and the Nebenkostenvorauszahlung is €250, the cap is €3,000, not €3,750.
2. Three monthly installments allowed. The tenant has the legal right under § 551 Abs. 2 BGB to split the deposit into three equal monthly installments. The first is due at move-in, the second one month later, the third the month after that. You cannot demand the whole amount upfront if the tenant invokes this right. You can offer a one-shot payment, you just cannot require it.
3. Hard cap. Any clause in the lease asking for more than three months is automatically void to the extent of the excess. The tenant is entitled to refund the surplus with interest, even mid-tenancy.

For a furnished apartment, the same three-month cap applies. The Möblierungszuschlag (furniture surcharge) is part of the rent and counts toward the base on which the cap is calculated.

How to hold it: the separate Kautionskonto

This is where most first-time landlords slip up. § 551 Abs. 3 BGB requires that the deposit be held separately from your own assets, at a credit institution, in an account that bears at least the standard interest rate for savings deposits with three-month notice.

The three practical options:

A regular checking account where you happen to label €3,000 as “deposit” does not meet the requirement. The deposit must be visibly and legally segregated. Otherwise the tenant can demand transfer to a proper Kautionskonto at any time and, if you go insolvent, the deposit gets pulled into your insolvency estate and the tenant loses it.

When done properly, § 551 Abs. 3 BGB grants the tenant an Aussonderungsrecht in your insolvency. The deposit is treated as the tenant’s property held in trust, your creditors cannot touch it.

Interest belongs to the tenant

This is the rule that surprises many landlords. Whatever interest accrues on the Kautionskonto over the tenancy belongs to the tenant, not to you. With current rates around 2.5 to 3.5% on top deposit accounts, a €3,000 deposit held for five years generates roughly €400 to €550 in interest. That money is paid to the tenant when the deposit is returned.

You are obligated to:

• Hold the deposit in an account that earns at least the standard rate for three-month-notice savings.
• Document the interest accrued.
• Pay it out together with the principal when the tenancy ends and no withholdings apply.

Failing to earn interest because you parked the money in a 0% current account does not save you. The tenant can claim the interest you should have earned, even if you didn’t.

When the tenancy ends: how long can you hold the deposit?

There is no statutory deadline for returning the deposit. § 551 BGB regulates the amount and the holding form, not the timing. What German courts (BGH) have settled is a practical framework:

• 3 to 6 months. The customary range. Most disputes are settled within this window.
• Less than 3 months. Required if all your potential claims are clearly resolved earlier. A short-tenancy refund where there is no Nebenkostenabrechnung outstanding, no damage, and no rent arrears should be returned within weeks, not months.
• Up to 6 months. Generally accepted if you are waiting for the final Betriebskostenabrechnung to verify whether the tenant owes a Nachzahlung. Beyond this, courts increasingly require partial release of the undisputed portion.
• More than 6 months. Permitted only if a specific dispute (e.g., a damages claim, a pending tax assessment that affects Grundsteuer recovery) genuinely justifies further delay.

The legal test is whether you have a “secured claim” (gesichert) against the tenant’s deposit. If not, you must release.

What you can legally withhold

Four categories of claim can be offset against the deposit:

1. Outstanding rent

Cold rent or Nebenkostenvorauszahlungen the tenant did not pay during the tenancy. This is the most clear-cut category. Document each missed month with bank statements and the relevant lease terms.

2. Pending Nebenkostenabrechnung (Nachzahlung)

If the tenancy ends mid-billing-period, you can hold a portion of the deposit corresponding to the expected Nachzahlung until the final Betriebskostenabrechnung is sent. The reserved amount must be proportionate. A reasonable benchmark is the Nachzahlung from the previous year, scaled to the months of the current period.

Example: previous year’s Nachzahlung was €240, the tenant lived in the unit for 8 of the current 12-month period. You can reserve roughly €160 until the final statement is issued (typically by 31 December of the following year).

You cannot hold the full deposit “just in case”. German courts have repeatedly struck this down.

3. Damages beyond normal wear (Abnutzung)

The cleanest area to lose money in. The line between normal wear (not deductible) and damage (deductible) is fact-specific.

Examples of normal wear (not deductible):

• Light scuffs on walls and floors
• Small nail holes from picture hanging
• Wear on door handles, kitchen counters, taps
• Yellowing of white paint over years
• Sagging carpet in high-traffic areas

Examples of damage (deductible):

• Burn marks, deep gouges, broken tiles
• Holes in walls beyond normal picture-hanging
• Cigarette smoke damage requiring repainting (where the lease prohibits smoking or where damage is excessive)
• Pet damage (scratches, urine stains on flooring)
• Broken sanitary fittings or appliances supplied by the landlord

A Wohnungsübergabeprotokoll signed at move-in and move-out, with dated photos, is the single best evidence base for damage claims. Without it, the tenant can credibly claim every defect predated their tenancy, and the burden of proof is on you.

4. Cosmetic repairs (Schönheitsreparaturen)

Only deductible if the lease contains a valid Schönheitsreparaturen clause. The clause must satisfy the BGH’s strict criteria. Many older clauses are now void. A void clause means you cannot charge the tenant for any cosmetic repair, even if the unit was freshly painted at move-in.

Common clause-defeating problems:

• Rigid time intervals (“every 3/5/8 years”) without considering actual condition
• Quotenklauseln (proportional payment if the tenant leaves before the next interval)
• Coverage of common areas (Treppenhaus, etc.)

If your lease was signed before 2015 and you haven’t had it reviewed, assume the Schönheitsreparaturen clause is void. Withholding deposit on this basis without a current legal review is a fast way to a successful tenant claim.

What you cannot withhold

A few items landlords sometimes try and lose in court:

• Normal wear and tear. Not deductible, regardless of whether the lease says so.
• Repair of items the tenant did not damage. Pre-existing defects, defects from prior tenants, building-level defects.
• Replacement of items that have reached end of life under depreciation tables. A carpet at age 12 is past its useful life. Even if the tenant damaged it, the deduction must be prorated to remaining useful life.
• Lump-sum or flat-rate cleaning charges without itemised invoices.
• “Convenience” deductions for general inconvenience caused by the move-out timing.
• Mod cons the tenant installed and is taking with them. If the tenant installed a kitchen at their own cost and removes it, the landlord cannot charge for the restored state if that was the agreed-upon arrangement.

The 6-month default in practice

A common landlord pattern: hold the deposit for six months, then refund the balance minus any documented claims. This is acceptable in most cases but not optimal.

What works better:

1. Within 4 weeks of move-out: review the unit, finalise damage claims, and refund all clearly undisputed amounts.
2. Hold only the proportionate Nachzahlung reserve for the pending Betriebskostenabrechnung. Send the remainder back.
3. As soon as the Betriebskostenabrechnung is final: release the remaining balance minus any documented Nachzahlung.

This approach reduces tenant complaints, avoids unnecessary interest accrual you owe the tenant, and signals professional handling that helps your reputation in the local market.

The Kautionsbürgschaft alternative

A growing share of tenants ask for a Mietkautionsbürgschaft instead of cash. The mechanic: the tenant takes out an insurance policy where the insurer pays the landlord on demand up to the deposit amount, and the tenant pays a monthly premium (typically 4 to 6% of the deposit per year).

From the landlord’s side:

• Pro: same legal protection as a cash deposit, less administrative work, no Kautionskonto to set up.
• Pro: payouts on claim are typically within 5 working days.
• Con: the landlord cannot insist on a Bürgschaft. The tenant has the right to a cash deposit. But you can accept a Bürgschaft if offered.
• Con: in extreme cases, the insurer’s payout might be challenged if the underlying claim is contested. The protection is generally robust but not absolute.

For new tenancies in 2026, accepting a Bürgschaft is increasingly common in cities where tenant cash-flow constraints are tight (Munich, Hamburg). For your portfolio, the calculation is simple: a Bürgschaft is roughly equivalent to a cash deposit for your purposes, with marginally faster payout and zero account-management work.

The Vermieter checklist

At lease signing:

• Lease specifies the deposit amount, capped at 3 months of cold rent.
• Lease informs the tenant of the right to pay in 3 installments.
• Lease specifies the form of deposit (cash, Bürgschaft, etc.).

Within 30 days of receipt:

• Open a separate Kautionskonto in trust for the tenant, or arrange a pledged Sparbuch, or accept the Bürgschaft.
• Inform the tenant in writing of the account details and confirm the deposit is held separately.

During the tenancy:

• Pay interest into the account at the bank’s standard rate. Keep statements.
• Do not touch the deposit for anything other than the four legal grounds above.

At move-out:

• Joint Übergabeprotokoll with photos and meter readings. Both sign.
• Within 4 weeks, calculate any deductions and release the undisputed portion of the deposit.
• Reserve at most the proportionate Nebenkostenabrechnung Nachzahlung.
• Final release with interest within 6 months, earlier if no Nachzahlung is pending.

Common landlord mistakes

1. Holding the deposit on a personal account. The tenant can demand transfer to a proper Kautionskonto at any time. In landlord insolvency, the deposit is lost to creditors and the landlord owes the full amount personally.
2. Keeping the interest. It belongs to the tenant. Failure to pay it out is unjust enrichment under § 812 BGB.
3. Withholding the full deposit for a minor dispute. Courts repeatedly rule that only the proportionate amount can be withheld.
4. Charging the tenant for normal wear under a void Schönheitsreparaturen clause. Have the clause reviewed if your lease predates 2015 case law.
5. Failing to document the unit’s condition with a Wohnungsübergabeprotokoll. Without dated photos and a signed protocol, damage claims are usually unwinnable.
6. Not refunding within a reasonable time. Six months is the outer bound, not the target. Refund the undisputed portion as soon as possible to avoid interest claims and disputes.

How this connects to your wider numbers

The Mietkaution itself is a custodial asset, not income, so it does not show up on your Anlage V. But the surrounding pattern matters: a well-handled deposit reduces tenant turnover friction, reduces legal exposure, and improves the perceived professionalism of your management, which directly affects re-let speed and your effective vacancy rate.

Use our rental yield calculator to model how vacancy assumptions feed into net yield, and the AfA calculator for the tax side. The deposit handling is one of those low-frequency, high-stakes processes where doing it right once is far cheaper than learning the hard way at a court hearing.