The rental deposit in Switzerland: understanding it all

What is the rental deposit for?

When you own a property and decide to rent it out, you will automatically be exposed to certain risks. By transferring possession of our property to a third party, we lose control of the property.

Indeed, many situations or problems can arise in the relationship tied to the rental contract, in particular when a tenant no longer pays their rent or when damage has been caused to your property.

In order to protect owners from these situations, the law grants them various rights, in particular the possibility of requiring other people to co-sign the lease so that they become jointly and severally liable co-debtors; that a third party act as guarantor for the tenant; that a liability insurance policy be taken out; or that their tenants provide security, also known as a "rental deposit", namely:

- Real security (pledge on claims and other rights, transfer of ownership, pledging, etc.)

- Personal security (bank guarantee, surety, debt assumption, etc.)

In this article, we are going to look at personal security, and more particularly at the bank guarantee and the surety.

Article 257e of the Code of Obligations applies to residential or commercial leases, when the security is provided by the tenant in the form of cash or securities.

Holiday apartments rented for less than three months are not concerned.

The cash or securities provided by the tenant to the landlord as security must be deposited at the bank by the landlord and placed in a deposit or savings account in the tenant's name. This provision is mandatory, which means that it cannot be waived.

The landlord may choose which bank they wish to deposit the security in. However, some cantons such as the cantons of Vaud, Fribourg and Neuchâtel require that the selected banks be located within their territory. The canton of Geneva, for its part, leaves the choice of bank to the tenants.

The account must be opened in the tenant's name, and if there are co-tenants, all of their names are listed on it, unless another option has been agreed between the tenant and the landlord.

In practice, the landlord leaves the choice of bank to the tenant, and even lets them carry out the transaction themselves. The tenant must nonetheless subsequently provide a document attesting that the security has been validly established.

The amount deposited as security gives the landlord a right of lien.

For residential leases, the tenant must pay the landlord an amount equivalent to a maximum of three months' gross rent. (art. 257e para. 2 CO).

A lower amount may be requested from the tenant, for example two months' rent, but conversely, it is not possible to require a deposit representing more than 3 months' rent.

Moreover, if the rent changes during the term of the lease, the amount of the rental deposit may also be adjusted.

Early release of the security may be requested, either during the term of the rental contract or at its end, in the following cases:

- With the agreement of both parties, namely the signature of the landlord as well as that of the tenant;

With the agreement of both parties, namely the signature of the landlord as well as that of the tenant;

- If the landlord holds an enforceable judgment stipulating that the tenant is the debtor of a certain amount;

- If the landlord is in possession of a payment order free of objection, or whose objection has been lifted. The payment order must still be valid, the debt collection must not be suspended, and it must be indicated that the claim is based on tenancy law;

If the landlord is in possession of a payment order free of objection, or whose objection has been lifted. The payment order must still be valid, the debt collection must not be suspended, and it must be indicated that the claim is based on tenancy law;

- If, within the year following the end of the lease, the landlord has not asserted any claim against the tenant in the context of court proceedings or debt collection or bankruptcy proceedings, the tenant may require the bank to return the security.

If, within the year following the end of the lease, the landlord has not asserted any claim against the tenant in the context of court proceedings or debt collection or bankruptcy proceedings, the tenant may require the bank to return the security.

The various rules mentioned for residential leases also apply to commercial premises, with the exception of the second paragraph of article 257 CO, which limits the security deposit to the equivalent of a maximum of 3 months' rent. The deposit required may exceed this limit but must be proportionate to the risk incurred by the landlord when renting out their property.

On the other hand, the landlord of commercial premises holds an additional right against the tenant, the right of retention. The landlord of a residential lease therefore does not have this right.

If you do not have the funds needed to pay your rental deposit, do not panic! The amount of three months' rent can, in some cases, represent a very large sum for a future tenant.

Indeed, not everyone has the ability to gather the necessary funds before moving in. As a result, some private companies (private surety companies) offer to provide rental guarantees without a capital deposit.

In return, the tenant undertakes to pay an annual premium to the company in question, which corresponds to a certain percentage of the rental deposit.

There is no guarantee that these companies offer the same rights and obligations: it is therefore necessary to read and understand the terms and conditions of each one. Surety companies are legally bound by insurance contracts. They are, consequently, like banks, under the supervision of the Swiss Financial Market Supervisory Authority (FINMA).

Legal basis

- Swiss Code of Obligations

- Cantonal laws

- Romandy framework agreement for residential leases

For any questions or requests for further information, do not hesitate to contact us at 021 312 09 32.