The rental bank guarantee

A protection for the landlord

A bank rental guarantee is a financial guarantee established by the tenant of the property in favour of the landlord until the end of the lease contract. This guarantee serves to compensate the landlord in the event of a default by the tenant.

When a landlord rents a property, he does so under certain conditions, as he wants to ensure that his property will be used with consideration and that when the tenant leaves, it will be returned in its original condition. The landlord usually requires a deposit, which may take the form of a bank guarantee. What is it?

A security deposit to cover rental risks

In order to protect themselves against the risk of unpaid rent and/or damage to the property, landlords can ask their tenants to provide a deposit.

This deposit can take several forms: either the tenant pays the deposit to the landlord by bank transfer or in cash, or he asks his bank to issue a rental guarantee. The state can also act as guarantor under certain conditions.

Who gives the order to issue a bank rental guarantee ?

The tenant, upon request from the landlord, instructs his bank to issue, in his name and on his behalf, the said guarantee in favour of the landlord.

What is the amount covered by the bank rental guarantee ?

Article 5 of the Amended Law of 21 September 2006 on residential leases regulates the rental guarantee and stipulates that it may not exceed an amount corresponding to three months' rent.

What is the counterpart of the bank rental guarantee ?

In principle, the bank requires the tenant to block the guaranteed sum in an account for a fixed period (often the initial term of the lease plus a few months), which may be renewable. The amount blocked in this account, usually a savings account, then serves as a guarantee for the landlord. Some banks provide, under certain conditions, for the issue of rental guarantees without the tenant having to block the amount of the guarantee in a blocked account.

What is the cost of a bank rental guarantee ?

The cost for issuing a rental guarantee, as long as it is counter-guaranteed by an equivalent deposit, is in principle 1% per annum of the amount guaranteed. The commission may stipulate a certain minimum amount.

Please refer to the bank's general and/or tariff conditions.

To whom does the interest accrue on a pledged deposit ?

The interest income generated by the deposit given as security belongs to the person who made it, in this case the tenant.

Under what conditions can a landlord collect all or part of the bank guarantee ?

In the case of a rental guarantee issued "on first demand", the bank is obliged to pay all or part of the guarantee to the landlord as soon as the latter has sent a request by registered mail. This can be done without the tenant's prior agreement and without the obligation to justify the reasons for the request.

In the case of a simple bank guarantee, the tenant's bank will only issue the amount claimed by the landlord if the latter proves the validity of his claim against his tenant by producing, for example, a final judgment by a judge sitting in a leasehold matter ordering the tenant to pay a specific amount, or by sending the bank a written statement from the tenant acknowledging that he owes the amount in question.

What happens if the tenant disputes the payment ?

In the case of a first demand bank guarantee, if the tenant contests, he will have to refer the matter to the Justice of the Peace.

How is the period of validity of a bank rental guarantee defined ?

The duration generally corresponds to the period of the lease. If the lease has a fixed term, the guarantee takes up this term.

When does the rental bank guarantee expire ?

At the end of the lease and after the last statement of account has been drawn up, if there are no claims to be made, the landlord will return the guarantee to the issuing bank in order to release it from its guarantee commitment. If any rent or charges remain unpaid, the landlord may deduct them from the amount pledged as security.

How to release a bank guarantee for renting ?

In order to release the funds blocked under the rental guarantee, the financial institution normally requires to receive a release form signed by both parties to the lease contract: the lessor and the tenant. Does the original guarantee document have to be returned to the bank? In principle, yes, but it is necessary to refer to the conditions set by the bank at the time of subscription.

What is the deadline for returning the bank rental guarantee ?

The guarantee can only be lifted after the inventory of fixtures and fittings and the return of the keys. In the case of a flat with rental charges, the tenant must wait for the annual statement of charges before recovering all or part of the amount paid to the landlord as a deposit. For the time being, the law does not provide for any time limit for the return of the deposit. However, the law will be reformed and it is planned to set a time limit.