The landlord usually requires a bank guarantee or rent deposit as collateral. Several companies also offer rent deposit insurance as an alternative, nowadays also for business premises.

Security is a matter for negotiation

Tenancy law does not order the tenant to furnish security. Previously it was usual to demand a deposit of up to six months' rent for business premises, but today the average is around three months' rent. Bank guarantees and rent deposits, however, put a block on liquid funds, and often the rent deposit for the previous premises has not yet been returned when a new contract has to be signed.

Rent deposit insurance as an alternative

Those who do not wish to block their funds or do not have enough money to pay the deposit can take out rent deposit insurance from an insurance company. The insurance company stands security for the rent deposit to the landlord. The catch: the tenant has to pay a lot of money for this guarantee. In addition to a registration fee, annual premiums of up to 5% of the deposit amount are due. This comes to a pretty penny. For a deposit of CHF 20,000, the tenant will pay almost CHF 5,000 in premiums over five years. A tenant who pays the rent deposit of CHF 20,000 for this period will get the full amount back in the end and also earn interest on the deposit, albeit at a very low rate.
Many tenants believe that rent deposit insurance protects them against claims by the landlord. This is not true. If the landlord claims against the rent deposit insurance, for example for damage to the rented premises, the insurance company will take recourse against the tenant.

Rent deposit insurance only with the approval of the landlord

Most rental contracts drawn up on a prescribed form only allow a deposit or bank guarantee as collateral. In these cases the landlord does not have to accept any other collateral. Rent deposit insurance should therefore only be taken out after the landlord has given his written agreement.

Tips:

• Negotiate hard about the amount of the deposit. More than three months' rent is out.
• Only take out rent deposit insurance if your cash flow does not allow you to provide a bank guarantee or pay a deposit.
• Cancel the rent deposit insurance when you have enough cash to give a deposit/bank guarantee.

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