How the rental deposit works in Switzerland

A rental deposit is a security that the tenant deposits in a blocked account at a bank in Switzerland in accordance with Art. 257e OR. The account is in the tenant’s name, and any interest earned belongs to the tenant, even though this is generally minimal these days. Depositing the money in a regular current account or fixed-term deposit account is not permitted. The maximum amount of the deposit in the private sector is three months’ rent.

The landlord typically sets up the restricted account, into which the tenant pays the required sum. During the tenancy, the amount remains blocked and can only be released with the consent of both parties or by a legally binding court decision. Any bank fees, particularly for administration or account closure, are generally borne by the tenant. Given the low interest rates and possible fees, the rental deposit can be financially disadvantageous for tenants.

Although the rental deposit is stipulated in most tenancy agreements, there is no legal obligation to deposit one. If a deposit is required, it must be held in a restricted account. The landlord may not freely access the deposited amount. A payout is only possible with the tenant’s consent or following a legally binding court decision.

As a rule, the rental deposit is paid at the beginning of the tenancy. However, the landlord may also demand a deposit at a later date, provided this is properly communicated. If a tenant refuses to pay the deposit, the landlord may terminate the lease or initiate debt collection proceedings.

The deposit is returned after the end of the tenancy and following a proper apartment handover. If no outstanding claims or damage are found, the landlord must release the deposit within 30 days. If repairs are needed, the period may be extended to up to 12 months. If the landlord does not assert any claims within this period, the tenant can request the bank to pay out the deposit directly.

A rental deposit is often a loss-making proposition for tenants, as interest rates are very low. There are also cases where landlords do not properly deposit the funds. In such situations, the tenant can demand that the money be paid into a proper restricted account. If this does not happen, the tenant may reduce the rent payments by the corresponding amount.

A popular alternative to the traditional deposit is rental deposit insurance. Instead of depositing a large sum, the tenant pays an annual premium to an insurance company. The insurer steps in on behalf of the tenant in the event of a claim and subsequently recovers the amount from the tenant. This allows the tenant to remain financially flexible. Also read our detailed cost comparison.

What happens if the landlord does not properly deposit the rental deposit? If the landlord does not deposit it in a restricted account, the tenant can request that they do so. If there is no response, the tenant may reduce the rent payments by the corresponding amount. The tenant can also claim the lost interest.

Can the landlord demand a deposit or increase it during the tenancy? Yes, this is possible, but it must be announced using an official form and enforced within the contractually agreed notice period. The tenant can challenge the increase before the conciliation authority.

When must the rental deposit be repaid? After the apartment handover, the deposit should be released within 30 days. If damage is found, the landlord has a period of up to 12 months to assert their claims.

When must the bank release the deposit even without the landlord’s consent? If the landlord has not asserted any claims within 12 months of the end of the tenancy, the tenant can request the bank to pay out the deposit. This typically requires the termination letter and the handover report.

A rental deposit can be a financial challenge for tenants. However, alternatives such as rental deposit insurance offer a flexible solution to minimise the financial burden. Find out more about when rental deposit insurance is worthwhile.