When renting a home or office, you usually have to put down a rental deposit as security. This includes drawbacks. Large amounts of money are tied up without yielding a return. On the other hand, they are simply increasingly plagued with fees. What exactly are the alternatives?
Around three months’ rent tangled up
For legal reasons, landlords are entitled to request up to three months’ rent as a rental deposit (for residential properties, according to Article 257e of the Swiss Code of Obligations). The secured amount can be utilized at a later stage to stay any tenant harm to the house or outstanding rent arrears. With a monthly rent of 2,000 francs, for example, we’re talking about a hefty sum. This means thousands of francs are tied up without accruing interest.
The trend towards negative interest levels in Switzerland is currently also being reflected in this field. An increasing variety of banks see rental deposits as an unattractive prospect. There is a growing tendency to charge registration costs, fees, and eventually, maybe even negative interest levels. With a typical account balance, this boils down to a predicament where fees are charged and deductions are created, no interest is paid.
Alternatives to the rental deposit
What alternatives are open to you? There are always a selection of different rental deposit plans on the market, from institutions such as banks and insurance firms. Tenants don’t need to pay cash deposit; they pay an insurance premium instead. A warranty is given to the landlord as security. Any legitimate outstanding debts are then settled through this rental deposit insurance. Generally speaking, these include tenant damage and any outstanding rental arrears. For more detail please visit, mietkaution schweiz
There are totally logical reasons for achieving this. The first is obvious: if money’s tight when relocating, the guarantee is a welcome alternative to paying a higher security deposit. In practice, as tenants prepare to pay a new deposit, it often happens that their previous one has not yet been released by their former landlord. Things may then get quite tight financially.
Rental deposit insurance: exactly what does it cover?
Strictly speaking, rental deposit insurance is not really insurance. ‘Guarantee’ is a far more appropriate term. The insurer simply makes a de facto advance payment. If it’s necessary to make payments, it’ll then request the same amount back from the tenant. Accordingly, the guarantee is by no means much like private liability insurance. All tenants are obliged to obtain a proper liability policy completely separate to the. This generally carries the financial risk for damage to the property.
Benefits and drawbacks
The arguments in favour are essentially the following:
- It relieves the financial burden you as a tenant. You don’t have to pay high cash deposit.
- Large sums aren’t tangled up unnecessarily. In today’s environment, there exists almost no yield on accommodations deposit. By contrast, these accounts are unpopular and beset by heavy fees.
The next drawbacks run counter to these arguments:
- The cost of the guarantee is undeniable: there’s a premium of around four to five % payable every year, depending on provider.
- It’s important to keep in mind that the guarantee is merely an advance, rather than actually insurance for financial liabilities.
It should also be added that the security, in whatever form it might take, must be expressly accepted by the individual or organisation responsible for its administration. In the event that you opt for rental deposit insurance, your landlord must give their explicit consent. The same applies in the event of subsequent termination of the contract; the landlord must give the go-ahead.