Rental deposits explained: blocked account, guarantee and what the law says

Almost every landlord asks for a deposit. But what exactly is it, and what forms are there?

What the law says

Art. 257e of the Code of Obligations governs security for residential premises: at most three months' rent, deposited in an account in the tenant's name. The bank only releases the money with both parties' consent or after a court decision. If the landlord makes no claim within a year of the end of the tenancy, the tenant can demand payment alone.

Option 1: the blocked account

You pay the sum into a rental deposit account. Advantage: minimal interest. Disadvantage: the money is gone, often for years – and when you move you need it twice because the old deposit isn't free yet.

Option 2: deposit insurance

A provider like Swisscautionen24 guarantees the landlord the sum and issues a certificate. You pay an annual premium. Advantage: your money stays available. Disadvantage: the premium is a fee and doesn't come back. Important: if the landlord makes a claim, the provider pays out but recovers the money from you. The insurance protects the landlord, not you.

Which is right when?

If you have three months' rent spare and won't need it: blocked account. If you want to keep liquidity for the move, furniture or a reserve – or the money is still in the old deposit: deposit insurance. Many switch back later or the other way round; both are possible.