Living - Deduct damages from deposit? BGH rules on rental dispute
Mieters and landlords frequently dispute in court over security deposits regarding rent payments and damages. Such a case has now reached the highest German Civil Court, the Bundesgerichtshof (BGH) in Karlsruhe, which will decide today whether a landlord could claim damages for damages to the rental property with a tenant's security deposit one-half year after the tenant's move-out. When do such claims typically expire, and when does an exception apply? Here are the most important questions and answers:
When can a landlord retain the security deposit?
Landlords can retain a tenant's security deposit under various circumstances. "This can be an unpaid rent claim or back payments for utility costs," says Beate Heilmann, a real estate lawyer and expert in tenancy and property law, speaking to the German Press Agency. For repairs neglected in the rental agreement, the money can also be withheld – provided they were agreed upon in the lease. "And then there are the landlord's claims for damages to the rental property, as in the BGH case at hand."
Such damage claims disputes often cause conflicts between tenants and landlords, Heilmann explains, who is the chairwoman of the Tenancy and Real Estate Working Group at the German Bar Association. For landlords, it is attractive to settle disputed claims with the security deposit, as they can then sue the tenant for repayment. In the case the BGH is now dealing with.
What is the issue in the specific case?
In this case, a tenant had sued her landlord because he did not return her security deposit of approximately 780 Euros after her move-out. The landlord justified this by stating that he was offsetting the security deposit against his damage claims. Since the landlord offset the deposit more than six months after the tenant's move-out, the tenant's argument was that his claims had expired. She sued for the return of the security deposit – and won in the lower courts.
When do landlord's damage claims expire?
In general, landlords have six months from the return of a rental unit to demand damages for property damage from their former tenants. However, the Civil Code allows an exception to the limitation period: If the claim could have been asserted within the six months, the assertion is still possible later.
A condition for this exception is that both claims are of the same type – in other words, a cash-for-cash claim. This is important because landlords can choose between demanding a monetary damage claim or allowing the tenant to restore the original condition of the rental property – a so-called natural restoration. Only monetary claims are equivalent to the security deposit and can be offset against it.
What are the potential consequences of the judgment?
Before the Federal Court of Justice, the question is therefore about whether the defendant landlord could have notified within the six-month period that they were demanding compensation for damages as a monetary damages claim - and not as a restitution in kind. A tenant-friendly judgment could have consequences for housing and property owners. In case of damages to the rental object, they might have to file similar claims within the limitation period in order to be able to offset them against the security deposit. They would therefore have to notify this no later than six months after the tenant's departure, that they are demanding compensation for damages in the form of monetary damages.
- The disputed case regarding a landlord's claim for damages against a tenant's security deposit is currently being heard at the Bundesgerichtshof (BGH) in Karlsruhe, a prominent Process (court) in Germany's tenancy law.
- This specific case involves a tenant who moved out of her rental unit six months ago and is seeking the return of her 780 Euro security deposit, as her landlord claimed damages to the property but notified her later than the usual six-month period.
- Beate Heilmann, a real estate lawyer and expert in tenancy and property law, explains that landlords can retain security deposits for various reasons, including unpaid rent or damages to the rental property, as previously seen in the BGH case.
- The German Press Agency reported on this case, highlighting the importance of understanding the implications of tenancy law and the specifics of security deposits and damage claims in Germany's living arrangement.
