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Maximum amount allowed for a rental deposit

In French-speaking Switzerland and Geneva, the rent deposits for residential premises may not exceed three net rents. For business premises, the amount of security is not limited. It must be handed over within 30 days of signing the rental agreement or at the latest when the property is handed over.

Reimbursement of the rental guarantee or the rental deposit

Rental agreements subject to the framework rental agreement for French-speaking Switzerland

The framework lease agreement for French-speaking Switzerland has been declared mandatory by the Federal Council and has entered into force. It applies to rental agreements for residential premises. Excluded from this are rental agreements for single-family houses with six or more rooms (kitchen not included) and luxurious apartments of six rooms and more (kitchen not included) as well as holiday apartments rented for a maximum of three months.

It stipulates that the rent deposit may be reimbursed in whole or in part if there is an agreement dated and signed by the tenant and the landlord, or an enforceable judgement constituting a judgment and order against the tenant in regard to a debt relating to the lease, or in default of judical proceedings against the tenant, he can recover the guarantee one year after leaving, without the landlord's signature. 

Rental agreements which are not subject to the framework rental agreement for French-speaking Switzerland

For rental agreements which are not affected by the framework rental agreement for French-speaking Switzerland, the presentation o an order to pay that has not been opposed or whose opposition has been definitively lifted, is sufficient for a refund.

Security without bank deposit (surety bond insurance)

For some years now, companies and insurers have been offering tenants a security deposit without a bank deposit. A tenant who cannot afford to pay a bank guarantee or who prefers to invest this amount elsewhere concludes a contract and pays an annual premium of between 4.5 and 6%. Some insurers charge in addition to the registration fee, administrative fees, cancellation fees, costs in case of damage and costs for adjusting the amount of the guarantee.

It is important to note that this premium is paid in full and in advance at the beginning of each year. In the event of damage, the insurer advances the amount to the lessor up to the amount of the guarantee and bears the risk of insolvency of the tenant. In principle, for the guarantee for a company, the signature of a board director who is personally liable is required. The contract can only be terminated with the agreement of the landlord. In the event of a dispute between the tenant and the lessor, the premium is due until the dispute is resolved.

Calculation examples, rental guarantee / deposit CHF 6,000 for a residential premise

Insurer A

Annual premium CHF 283.50

For 5 years CHF 1'417.50
For 10 years CHF 2'835.00

Insurer B

Premium 1st year CHF 231.00
Following years CHF 336.00 + administration costs CHF 20.00
Costs for termination CHF 50.00
Costs in the event of a claim CHF 100.00

For 5 years CHF 1'675.00
For 10 years CHF 3'455.00
+ Termination costs CHF 50
+ Costs in case of damage CHF 100.00

Usual bank deposit

CHF 6'000, interest in favour of the tenant, currently (2018) 0.01 % = CHF 0.60 per year)

Conclusion

I mean, the rent deposit without bank deposit is very similar to a loan, which only has to be paid back in case of damage and is very expensive for the tenant and the landlord has no advantage compared to a bank deposit. A tenant who does not have enough liquidity to pay a bank deposit is certainly less solvent than a person who can transfer the amount immediately to a bank account. For a newly established company, the  deposit  without a bank deposit can facilitate the management of liquidity, especially if they have to invest large amounts in order to start their business.

 © Written and translated by Esther Lauber, Real Estate Trustee with Advanced Federal Diploma of Professional Education and Training, real estate broker
Legal terms taken from the portal of the Swiss goverment (Swiss laws), partly translated from Germain to English with DeepL, in case of doubt, the French or Germain version should apply

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Rent deposit (rent guarantee) in Geneva and Switzerland