The ins and outs of the rental deposit in Luxembourg

*Spuerkeess considers an expat to be a person who has signed a work contract in and is moving to Luxembourg.  

In Luxembourg, most rental agreements require the tenant to provide a rental deposit to the owner.  

• A rental deposit is a kind of rental deposit which safeguards lessors (property owners) and guarantees them the funds required to pay for any repairs or recover any unpaid rent or utilities in the event the terms, conditions and obligations under the lease (rental agreement) are not met. 

• Luxembourg's legislature set the amount of this guarantee at a maximum of three months’ rent excluding utilities.  

For example: if your rent is EUR 1.500 excluding utilities, the amount of the rental deposit might be EUR 4.500. 

If you’ve found a place to live, our Spuerkeess advisors are at your disposal for any questions you may have or advice regarding the "rent payment" bank guarantee.  

At Spuerkeess we typically suggest the "first demand rent payment" bank guarantee with a deposit (pledge) because it protects both parties (the lessor and the tenant(s)). The advantages of this guarantee are listed below:  

• For the tenant: the money is placed on hold in your savings account (i.e. pledged) for the duration of the lease, and you can still earn interest even though you may be accountable for banking fees (based on your bank offering); 

• If the tenant lives at a property without causing damage or the need for repairs, there is a good chance the funds will be released at the end of the lease. However, the final word always goes to the beneficiary of the guarantee.   

• For the owner (lessor): he has the "insurance" that your bank is required to pay all or part of the funds "on first demand", without the prior consent of the tenant and with no obligation to justify the reasons for doing so. 

Note:  Rental deposits usually last for the duration of the lease. 

At the end of the lease and before the tenant returns the keys, the owner or real-estate agency must conduct a mandatory end-of-tenancy inspection in writing and in the presence of both parties.  

This inspection leads to one of two outcomes: 

• The rental deposit is released: in the absence of damage and if the tenant's commitments have been honoured, the owner must release the rental deposit. However, the tenant must wait for the annual utilities statement before the amount on hold for the owner (lessor) is released. 

• The rental deposit is retained: in the event of a disagreement, the owner may retain all or part of the guarantee to cover any costs of repairing or restoring the property to its previous state. If the guarantee is not enough to cover the damage, the owner may ask the tenant to pay the difference. 

Note: the owner must return the letter of guarantee received at the start of the lease to the bank to be able to release the amount held for the rental deposit.  

If a person does not possess the "means necessary to finance a rental deposit (guarantee of solvency or surety) required by the lessor", Luxembourg offers government aid for the rental deposit (under certain conditions):