KARLSRUHE (dpa-AFX) - When may a landlord offset compensation for damage to an apartment against the landlord's deposit repayment? The Federal Court of Justice (BGH) in Karlsruhe dealt with this question on Wednesday. The focus was on the discussion about the application of an exception rule according to which landlords can, under certain conditions, claim damages even after the limitation period of six months. The highest German civil court is set to announce a ruling on July 10.

In the specific case, a tenant had sued because her landlord had withheld her rental deposit after she had moved out. He justified this by saying that he was offsetting the deposit against claims for damages to the apartment. However, as the landlord only settled the claim more than six months after the tenant moved out, the tenant felt that her claims were already time-barred. She sued - and was proved right in the lower courts.

Deposit often causes disputes

In general, landlords are allowed to withhold their tenants' deposit under various circumstances. "This can be a rent claim that has remained unpaid or back payments for operating costs," said lawyer and tenancy law expert Beate Heilmann to the German Press Agency. Money can also be withheld for neglected cosmetic repairs - provided these were agreed accordingly in the rental agreement. "And then there are claims by the landlord for damage to the rental property, as they also play a role in the BGH proceedings".

Such claims for damages often lead to disputes between tenants and landlords, according to Heilmann, who is Chairwoman of the Tenancy Law and Real Estate Working Group at the German Bar Association. For landlords, it is attractive to offset the disputed claims against the deposit, as it is then up to the tenant to sue for repayment - as in the case that the BGH is now dealing with. The limitation period for claims also plays a decisive role here.

Claims expire after six months

This is because landlords generally have six months after returning an apartment to claim compensation for damage from their former tenants. "If the deadline is not met, these claims are gone," explained Heilmann. However, the German Civil Code provides for an exception to the limitation period. According to this, offsetting is also possible after the six months have expired if the claim was not yet time-barred at the time when it could have been offset for the first time.

However, one of the conditions for offsetting is that two "similar" claims are involved - i.e. "cash against cash" in the case of the cash deposit. The two sides of the tenant and landlord have different views on the question of whether this similarity existed in the present case.

This is because landlords may choose, in the case of compensation for damage to the rental property, whether to give the tenant the opportunity to restore the apartment to its original condition themselves - so-called in rem restitution - or to demand monetary compensation. However, only the monetary compensation could be offset against the cash deposit.

Landlord refers to exemption clause

The landlord's lawyer believes that his set-off is covered by the exception. The declaration of set-off including the right of substitution - i.e. the transfer from in rem restitution to monetary payment - could therefore have been declared before the limitation period and must therefore also be possible after the limitation period. Like the Court of Appeal, the opposing party is of the opinion that the landlord should have declared his intention to offset the damages as monetary compensation within the limitation period.

The Eighth Civil Senate also stated on Wednesday that previous case law indicates that the existence of a valid set-off situation - including the similarity of the claims - is necessary before the limitation period. However, the case raises a number of interesting legal questions./jml/DP/nas