Rental dispute in court - BGH strengthens landlords when settling deposits for damages
Renters and landlords often argue over the return of the security deposit at the end of the tenancy regarding the reimbursement of damages. The Federal Court of Justice (BGH) has now restricted the rights of landlords in a dispute over damage claims against the security deposit. They can indeed charge rentors for damage compensation in cash instead of restoring the damaged item, even if they have not exercised their right of recourse within the six-month statute of limitations, according to the Karlsruhe Senate in a judgment. The right of recourse allows landlords to demand monetary damage compensation instead of repairing damaged property.
In this specific case, a tenant had sued because her landlord had not returned the security deposit of around 780 Euros after she moved out. He justified this by deducting damage claims for damages to the rental property. Since the claims, according to the tenant, had expired, she sued for the return of the security deposit - and won in the lower courts. However, the landlord's appeal was successful.
The BGH overturned the Nuremberg-Fürth District Court's judgment and remanded the case back to the court. The District Court had not adequately considered the mutual interests of the parties in setting a bond deposit. The bond deposit serves to secure the landlord's claims, explained the court, among others, responsible for rental law. "This should be able to be settled easily through offsetting against the security deposit refund claim," so the BGH.
Good news for some, bad news for others
From the German Tenants' Association's perspective, this judgment is "not good news for tenants and tenants, as this judgment disregards their interest in swift legal security over their security deposit," said President Lukas Siebenkotten. Tenants could no longer rely on the fact that their former landlord would not confront them with damage claims more than half a year after their move-out.
However, the question of potential claims for damages to the rental property is often disputed, according to Siebenkotten. "Tenants and tenants are left with nothing else but to litigate their claim for the return of the security deposit if the landlord unjustifiably withholds parts of the security deposit due to alleged damages in the rental property."
The Property Owners' Association Haus und Grund welcomes the BGH's decision. It has granted private landlords practical flexibility, according to the Central Association of German Homeowners, Tenants, and Landlords. However, they also appealed to landlords to document all visible damages at the handover of the property and to offset against the security deposit accordingly.
Exception applies only to "Cash for Cash"
Generally, landlords have six months from the return of a rental property to claim damage compensation from their former tenants. However, there is an exception: If the claim could have been calculated before the six-month period expired, then the calculation can still be made later. A condition for this is that both claims are of the same kind - in other words, for "Cash for Cash" security deposits.
The question of the equivalence of claims played a central role in this case, as landlords have the option to demand monetary compensation for damages to the rental property or to give the tenant the opportunity to restore the original condition of the property themselves. This is also known as restitution in law.
According to the Nuremberg-Fürth District Court, the landlord should have declared during the six-month limitation period that they were demanding monetary compensation. Only monetary compensation, after all, is equivalent to the "Cash for Cash" security deposit. However, the Federal Court of Justice ruled otherwise. Whether the landlord exercised their right to demand monetary compensation or restitution within the period of limitation is therefore irrelevant.
- In this particular dispute, the Federal Court of Justice (BGH) limited the landlord's ability to claim damage compensation from the rentor's security deposit, allowing them to opt for cash repayment instead of restoration, even beyond the six-month statute of limitations, as decided by the Karlsruhe Senate.
- Lukas Siebenkotten, the President of the German Tenants' Association, expressed concerns over the BGH's judgment, stating that it disregards tenants' interest in swift legal security regarding their security deposits.
- According to Siebenkotten, the ruling leaves tenants with no choice but to litigate if their former landlords unjustifiably withhold parts of their security deposit due to alleged damages to the rental property.
- The Property Owners' Association Haus und Grund, on the other hand, welcomed the BGH's decision, as it grants private landlords practical flexibility in dealing with damage claims.
- The exception to the six-month statute of limitations for damage compensation claims pertains to "Cash for Cash" security deposits, where both claims are of the same kind, allowing for later calculation when the initial period has expired.
