Did you know that there are five types of rent guarantee and that subject to certain conditions, you may be eligible for financial assistance from the government to finance it?
When you rent a home, the landlord almost always asks for a rent guarantee or “deposit” to cover your obligations under the lease (rent payments, charges or damage to the property, if any). The deposit may be as much as three months’ rent, and can only be requested once the landlord has taken a mandatory written inventory in the presence of the tenant before handing over the keys.
In view of the size of the amount that the deposit often represents, there are four options available to you.
Both of these options consist in paying the deposit out of your own funds. These options are popular with landlords but sometimes make it difficult to get all or part of the deposit back in the event of a dispute when it comes to the check-out inventory.
Note that a landlord can never demand payment of the deposit in cash. If this option appeals to you, remember to ask for a receipt. Whichever option you choose, the deposit never earns interest for the tenant unless it is expressly stipulated in the lease.
A bank guarantee is probably the most commonly used option in Luxembourg because it offers advantages for both parties.
A bank guarantee is probably the most commonly used option in Luxembourg because it offers advantages for both parties. The landlord has the reassurance that the amount of the deposit is frozen on your account for a period (usually the term of the lease plus a few months) that can be renewed. The advantage for you is that you earn interest on the sum frozen as a guarantee, although there may be bank charges.
In Luxembourg, you will generally be offered a “first demand guarantee”. Under this formula, the landlord can demand all or part of the deposit frozen on your account from your bank, without your prior agreement and without having to justify his request.
Strictly subject to the agreement of the landlord, this option consists in obtaining a guarantee from an insurance company. The tenant takes out an insurance policy, and in the event of non-payment of the rent or damage to the property the insurance company compensates the landlord directly, up to the sum insured.
The advantage of this option is that you do not have to tie up a large sum of cash in the deposit. However, as you will never get the insurance premiums back, this solution is expensive and is only suitable for short and medium-term leases. Also, if the insurance company compensates the landlord for unpaid rent, it may then pursue you for the compensation paid. This is something to bear in mind.
If you are unable to finance the deposit, you can apply for financial assistance from the Housing Support department at the Ministry for Housing.
If you are unable to finance the deposit, you can apply for financial assistance from the Housing Support department at the Ministry for Housing. This assistance is subject to certain conditions:
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