Deposit Interest: Who Is Entitled to It and How Is It Calculated?

Many tenants don't realize a German rental deposit is supposed to earn interest over the years, even though the law explicitly requires it. Anyone who gets back only the amount they originally paid at move-out may be getting less than they're owed.

The statutory duty to pay interest

Under Section 551(3) BGB, a landlord must invest a cash deposit separately from their own assets, at a credit institution, at the standard interest rate for savings deposits with three months' notice. The returns from that investment belong to the tenant and increase the deposit accordingly. This duty applies regardless of whether the rental contract says anything explicit about interest.

How much interest actually accrues

Because the rate tracks the market rate for savings deposits with three months' notice, returns have generally been modest in recent years given the low general interest-rate environment, though they can be more noticeable when central bank rates are higher. What matters isn't a fixed percentage, but the market rate for this type of account over the length of the tenancy.

Who receives the interest at refund time

Interest accrued during the tenancy is paid out together with the deposit itself once the tenancy ends, provided no legitimate deduction applies. If the landlord deducts amounts for damage or unpaid Nebenkosten, that only reduces the principal, not automatically the claim to interest that had already accrued before that point.

The exception for certain types of housing

A statutory exception under Section 551(3) BGB applies, among others, to publicly subsidized housing and to housing let for temporary student accommodation or company housing. For these types of housing, the duty to invest the deposit at interest doesn't apply.

What to do if no interest is paid out

Anyone who gets back only the original amount paid at final settlement should ask the landlord in writing about the deposit account and the interest accrued on it. If the landlord refuses to provide information or payment, getting advice from your local tenants' association can help, particularly if none of the statutory exceptions apply.

Conclusion

A landlord must invest a cash deposit separately and at interest; the interest belongs to the tenant and is repaid together with the deposit. Exceptions exist only for certain types of housing, such as subsidized housing or student accommodation.

Frequently Asked Questions

Does the landlord have to pay interest on the deposit?

Yes, under Section 551(3) BGB, a cash deposit must be invested separately from the landlord's assets, at the standard rate for savings deposits with three months' notice.

Who owns the interest?

The tenant. It increases the deposit amount and is paid out together with it when the tenancy ends.

Are there exceptions to the interest requirement?

Yes, including for publicly subsidized housing and certain types of housing such as student or company accommodation.

What if I don't receive interest at refund?

Ask in writing about the deposit account and the interest. If the landlord doesn't respond, getting advice from your local tenants' association can help.

Anyone searching for a new apartment and wanting to sort out the deposit question in advance can browse current listings on Waitly. For the deposit cap and installment rights, see Deposit Amount and Installments: What Section 551 BGB Allows. An alternative to a classic cash deposit is described in Deposit Guarantee Bond Instead of a Cash Deposit. For the deductions themselves, see What Landlords Can Deduct From Your Deposit in Germany.