Rental deposit in client account not necessarily insolvency-proof

If a landlord who is also a lawyer holds a security deposit from a tenant in a client account, there is a risk that it will become part of the insolvency estate in the event of the landlord’s insolvency. This was the decision of the Frankfurt am Main Regional Court in appeal proceedings pursued by BRRS partner Dr. Stephan Schlegel from Eschborn (2-16 S 87/19).

In contrast to the lower court’s decision, the appeals court confirmed Schlegel’s view that a rent security deposit must be held in a trust account that bears a clear designation such as “rent deposit account” or a similar designation. If, on the other hand, an account with the designation “Clients of my law firm” is used — as in the present case — the requirements of Section 551 (3) third sentence Civil Code [Bürgerliches Gesetzbuch; BGB] are not fulfilled. According to this provision, the deposit must be separated from the landlord’s assets.

Bild: © Patrick Daxenbichle, Adobe Stock