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Legal basis
- Art. 257e of the Swiss Code of Obligations
- Cantonal laws (Geneva:law protecting guarantees provided by tenants from the 18th of April 1975 and regulations for the enforcement of this law)
- Framework contract applicable for Frenchspeaking Switzerland
The provisions concern leases for commercial and residential premises. Other real estate leases are not concerned.
Bank rent guarantee (bank deposit)
What is a bank rent guarantee?
A bank guarantee is a form of security that guarantees the execution of commitments entered into by the tenant in regard to the lessor and stemming from the lease or from possession, over and above the lease, of the object which is rented. According to the framework contract for Frenchspeaking Switzerland, the guarantee should be provided within 30 days following the signature of the lease, but at the latest when the tenant enters into possession of the premises. If the tenant does not provide it, the landlord may refuse to hand over the premises in accordance with art. 82 of the Swiss Code of Obligations.
The bank account
You must pay the agreed amount into a bank account with a bank in Switzerland or, in accordance with the framework agreement for French-speaking Switzerland, with a bank established at the location of the building and ask your banker to issue a guarantee certificate. The amount on the bank account will be blocked.
In Geneva and French-speaking Switzerland, for the rental of a dwelling, the rent guarantee may not exceed the amount corresponding to three months' net rents.
In the cantons that are not covered by the framework contract for French-speaking Switzerland, the maximum amount corresponds to 3 months' net rent. This limitation on the amount is also valid for luxury homes, but holiday apartments rented for 3 months or less are not affected.
There is no maximum limit for a commercial premise.
How to obtain a bank rent guarantee
In practice, the tenant must pay the agreed sum into a bank account at a bank located in Switzerland, and give an order to his bank to issue a banker's guarantee or a confirmation that a deposit has been made. Most banks have appropriate forms, which must be signed by the contracting parties to open a bank rent guarantee account. Some banks confirm in the bank guarantee certificate that the amount of the guarantee has been paid. The guarantee certificate is issued in 3 copies, one for the landlord, the bank and the tenant.
This is quite new: some banks now provide a guarantee in respect of the lease agreement and mention in art. 1 that the bank guarantee account has been opened and that the tenant must provide the landlord with proof, i.e. the credit notice confirming the payment of the guarantee deposit and under art. 2 the guaranteed savings account is cancelled if the tenant does not pay the amount within 3 months.
Virtually no tenant provides us with this proof immediately and we must remind them each time that this security agreement is worthless without this proof.
In the case of a flat, the security cannot be more than three month's net rent, but for commercial premises there is no limit to the maximum sum. Bank interest is credited to the tenant's account.
What does it cover?
All claims arising from the lease are covered, e. g. rent, charges, damage caused by the tenant, etc.
Who decides on the type of guarantee?
It is the landlord who decides the type of rent guarantee and cannot be forced to accept another type of guarantee insurance.
Who owns the bank rent guarantee?
The bank account to which the amount of the rent deposit is blocked is in the tenant's name and belongs to him. For this reason, the tenant is not allowed to offset the rents with the bank rent guarantee. Bank interest is credited to the tenant's account and he must declare the amount of the guarantee and the interest credited to the tax authorities.
Freezing and retrieval of a bank rent guarantee
The sum constituting the bank guarantee is frozen at the bank and may be unblocked wholly or in part under the following conditions.
- A written agreement between the parties, duly dated and signed by the lessor and by the tenant
- An enforceable judgement constituting a judgment and order against the tenant in regard to a debt relating to the lease
- An order to pay that has not been opposed or whose opposition has been definitively lifted. In French-speaking Switzerland, this release condition does not exist for housing.
- In default of judicial proceedings against the tenant, you can recover the guarantee one year after leaving, without the lessor's signature
In case of bankruptcy
The security is not affected in the event of the owner's bankruptcy, because the amount belongs to the tenant. If the tenant goes bankrupt, the landlord has a right of lien on the guarantee.
Rent guarantee insurance (rental guarantee without bank deposit)
The tenant may not require the landlord to accept guarantee insurance. This form of guarantee is very expensive for the tenant. Premiums are to be paid in full and if the tenant no longer pays the annual premiums, the landlord may be left without coverage.
Other possibilities of security for the lessor
- co-tenants
- guarantor
- rent per quarter in advance
- etc.
© Esther Lauber, Real Estate Trustee with Advanced Federal Diploma of Professional Education and Training, real estate manager
