Tenants, Beware of Your Deposit is Really Separate

The BGH warned in its judgment of December 20, 2007 (re: IX ZR 132/06) that tenants ought to pay attention to what their landlord does with their deposit. The court had to decide what happens to the deposit in case of bankruptcy and whether the tenant may receive his money back.


The tenant sued the landlord in 2001 for reimbursement of the paid deposit. Upon signing the contract, the tenant paid the deposit of DM 1,700 to his landlord. The proprietor, in violation of §551 III BGB, did not separate these funds from her own assets. The rental contract was terminated to November 2004. On March 1, 2005, the proprietor went bankrupt. A manager was installed to realize determine and distribute the assets of the landlord and entered the pending case against the landlord.

The tenant argued that pursuant to §47 InsO, he could demand the separation of his money. The legal argument is that whatever does not belong to the bankrupt estate can be separated and returned to the actual owner.

The judges argued that insolvency law does not permit separating single claims from the bankrupt estate. Since the landlord did not separate his assets from the tenants deposit which was to be held in trust, this deposit belongs to the landlord. Whenever the landlord does not follow this legal duty, the tenant is generally entitled to reduce the rent to the value of the deposit to be returned. Only when an account is in a special trust account holding exclusively third-persons money, will you be able to demand separation. If this has not happened then your deposit is virtually gone. You are then standing in line with all other creditors.


One month after moving in, make sure you have received some kind of proof that your landlord has set your deposit aside from his personal assets. If he does not comply with your wish, then after explicitly warning him, deduct the rent to the amount of the deposit. You also have the right to sue your landlord in court that he explicitly informs you where your deposit is. Expect to see a bank statement, with something like a “Mieterkautionskonto (renter’s deposit account)”. In the case, you decide to withhold the deposit, then it would be prudent to put that amount also in a special account. You will then however no longer have the right to pay the deposit in three installments, as at the time of signing the contract.

Published on the old CMS: 2008/2/25
Read on the old CMS till November 2008: 1,553 reads

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