Deposit in shares: When the landlord speculates with the tenant's money

Tenants have a say: they can suggest that their deposit be invested in shares.

Deposit in shares: When the landlord speculates with the tenant's money

Tenants have a say: they can suggest that their deposit be invested in shares. Is it worth it? An heiress recently collected 100,000 euros from her parents' deposit. The lawyer Bettina Wirmer-Donos from the law firm FPS explains the risks of such an agreement in an interview with "Capital".

After the death of her parents, a daughter was supposed to get back her rent deposit of 800 marks at the time. The landlord had invested the money in shares and the value had grown to more than 100,000 euros. The District Court of Cologne has now decided that he must hand over the money. How do you classify this judgement?

Bettina Wirmer-Donos: Of course, this decision has a certain public impact, because a lot of money is at stake. But that is not the norm. From a legal point of view, I think the whole thing is an exception. Because in practice, there are very few leases that, as in this case, run for many decades. It's not often that someone rents the same apartment for 40 years. And the verdict is not particularly surprising either: since the 1980s, tenants have been entitled to the income from the deposit - regardless of whether it is in a deposit account or invested in the capital market.

In this particular case, the landlord has invoked a clause allowing him to choose whether to return the original value of the deposit or the shares. Does that mean you wouldn't stand a chance with such a clause today?

Definitely not. There is a lot of legal regulation in the living space, including how to deal with the deposit. It's also understandable: After all, the landlord plays with the tenant's money to a certain extent - so it's only logical if the tenant also gets the profits.

In your experience, how often does it happen that the rental deposit is invested in shares?

This is definitely not a widespread practice. Clients have not yet expressed any such design wishes to me. This is probably also due to the fact that it is simply unattractive for tenants and landlords. Even if both sides want it, all profits would go to the tenant. So the landlord would have extra work but would not benefit. And then the question arises: What happens if the deposit loses value? Does the tenant then have to shoot up? In addition, such an investment is usually worthwhile, especially in the long term. If you only live in an apartment for a few years, the risk is hardly worth it.

But theoretically, tenants and landlords could agree on this?

Yes, that would be possible. As a tenant, I can approach my landlord and suggest that, I have a say in that. For example, you could agree on a certain processing fee for the landlord as a kind of expense allowance. The only question then is whether the landlord will agree to it.

In case both sides agree - are there any rules or laws that dictate how the money should be invested?

No, this must be agreed individually. As a rule, these would then be equities, equity funds or real estate funds.

You mentioned earlier that the profits on the housing deposit go to the tenants. Do they also take the risk?

Yes, the risk of any losses lies with the tenant, after all, he would also benefit from profits. This is also the case with any negative interest for an account. Of course, you can theoretically make another agreement, for example, that you don’t have to pay more money in the event of a loss, but that would of course be rather unattractive from the landlord’s point of view. The only context in which this construct could be attractive would be commercial real estate.

Why this?

There is no direct legal requirement that 100 percent of the profits go to the tenant. Here you could also make another agreement and share the profit. In addition, there are usually professional landlords behind commercial real estate who also have the necessary know-how to look after such investments. You can hardly expect that from a private landlord. It would also be a way for housing associations to sell their own stock. But here, too, these would always be individual agreements between tenants and landlords. If a commercial landlord were to make profit-sharing a rule in terms and conditions, that might be invalid - especially if they receive a significant share of the profits.

Back to the court decision on the more than 100,000 euros. Could other tenants, who also invested the deposit in shares a long time ago, now demand the return of the money?

Anyone who has lived in the same rented apartment for a very long time, i.e. many decades, can certainly look in the contract to see what was agreed for the deposit. As I said, it is very rare, but maybe there is still a blessing in store for one or the other.

Charlotte Raskopf spoke to Bettina Wirmer-Donos

The interview first appeared on

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