You know the situation. You've found the right tenant, the paperwork looks fine, and then it turns out they can't put up three months' deposit in cash on top of the prepaid rent and the first month's rent.

You can hold the requirement and lose the tenant. Or you can compromise on the security, which no landlord should do.

A deposit guarantee is the third option. Here's how it works from your side of the table, and what to ask before you accept one.

In short:

  • A deposit guarantee means a third party provides the security to you instead of the tenant's own cash.
  • You still decide what security you require. The guarantee is a way of providing it, not a relaxation of your requirement.
  • The tenant remains fully liable for valid claims at move-out.
  • It requires you to have an agreement with the provider, and the tenant to be credit approved.
  • A deposit guarantee is not insurance, and it is not the same as landlord insurance.
  • It's a different instrument from a cash deposit. Always ask what triggers a payout before you accept.

What a deposit guarantee is from your side

With a cash deposit, you hold the money yourself. With a guarantee, you instead hold a claim against a third party that has undertaken to pay if you raise a valid claim.

Keyhole Guarantee is structured as an irrevocable on-demand guarantee. Irrevocable means it can't be withdrawn while it's active. On-demand means payment is made on demand against the agreed basis, rather than only once a dispute has been settled.

That's the mechanism you need to understand. It isn't the same as cash in hand, and you should know exactly what triggers a payout before you say yes.

What the guarantee replaces — and what it doesn't

It can replace

  • The tenant's cash deposit
  • The tenant's prepaid rent, if the guarantee is issued for that part too

Keyhole Guarantee can be issued in two parts, one for the deposit and one for the prepaid rent, with the guaranteed sum following the tenancy agreement. What applies to an individual tenancy therefore depends on what is agreed. Note that if the guarantee also covers the prepaid rent, the tenant hasn't paid it in cash — and then there's no prepaid rent to live out at the end of the tenancy.

It does not replace

  • Your right to set the security you require
  • The tenancy agreement or your obligations under the Danish Tenancy Act
  • The move-out inspection and the move-out report
  • Your documentation of the condition of the home at move-in and move-out
  • Your itemised settlement of the claims at move-out
  • The tenant's liability for the claims you raise

In other words, a guarantee changes where the money comes from. It doesn't change how you run the tenancy.

What to ask any provider

This is the most important part of this article, and it applies to every provider, including us. A guarantee is only worth something if you know when it pays.

  1. When is a payout made, and on what basis?
  2. Which objections from the tenant must the provider respect before paying?
  3. How long does the guarantee run, and what ends it?
  4. What happens on a change of tenant, or if the tenancy is extended?
  5. What does the guarantee cover in amount, and how is the sum set?
  6. What happens if the tenant doesn't repay the provider afterwards?
  7. What documentation is required from me as the landlord when I raise a claim?

If you don't get clear answers to those seven questions, the security isn't settled, whatever the product is called.

How a claim works at move-out

  1. The tenancy ends, and you carry out the move-out inspection and write the move-out report as normal.
  2. You itemise the claims in a move-out settlement, item by item, with documentation.
  3. You raise the claim with the provider against the agreed basis.
  4. Payment is made within a few working days once the basis is in place.
  5. The tenant remains liable and has to repay the provider.

That last line is worth being clear about with the tenant from the start. A guarantee moves the liquidity, not the liability. A tenant who believes the guarantee pays for damage is in for an unpleasant surprise — and that conversation ends up with you.

Requirements and limits

  • The solution only applies to tenancies where you are a Keyhole Partner.
  • The tenant has to be credit approved. If they aren't, the guarantee can't be provided.
  • The tenant pays a premium, which is not savings and is not paid back.
  • The guarantee has a ceiling, and it's set from the tenancy agreement.
  • The tenant can't choose the solution themselves. It depends on your agreement with Keyhole.

What the tenancy agreement has to say

Vagueness here costs you at move-out, not at signing.

  1. Write what security you require, and with what amount, expressed in months' rent.
  2. Write the deposit and the prepaid rent as two separate items, also when a guarantee is provided.
  3. Write that the security is provided as a guarantee, and which of the two items the guarantee covers.
  4. Write clearly what has been agreed about restoration at move-out.
  5. Keep the guarantee document with the tenancy agreement and the move-in report.

A deposit guarantee is not landlord insurance

The two get mixed up often, and the difference is real.

Deposit guarantee

A third party provides the security the tenant would otherwise have paid in cash. It is not insurance. The tenant pays the premium, and the tenant remains liable.

Landlord insurance

Keyhole Landlord Protection is landlord insurance developed together with TRYG. It covers losses that go beyond the security provided. So it doesn't replace the deposit — it covers what the deposit doesn't stretch to.

The two can be used together, but they solve two different problems: one makes sure there is security at all. The other covers the case where the security isn't enough.

How to offer it to your tenants

  1. Become a Keyhole Partner. That's the precondition for your tenancies to be covered.
  2. Decide what security you require, and which items you'll accept a guarantee for.
  3. Write it into your standard tenancy agreement, so it's the same across your tenancies.
  4. Mention the option in the listing. It's often what decides whether a good applicant applies.
  5. Be clear with the tenant that their liability at move-out is unchanged.

Frequently asked questions

Is a guarantee as good as cash?

It's a different instrument, and it should be judged on its own terms. Ask about the payout basis, the ceiling, the validity period and which tenant objections have to be respected, and judge from the answers.

Is a deposit guarantee insurance?

No. It's a guarantee provided to you. Keyhole Landlord Protection is insurance, but that's a different product covering something else.

Who pays for the guarantee?

The tenant pays the premium.

Is the tenant still liable for damage?

Yes. The tenant remains responsible for valid claims and has to repay the provider if a payout has been made.

Can the tenant choose Keyhole themselves?

No. You need an agreement with Keyhole before the solution can be used on your tenancies.

Do I still have to hold a move-out inspection and produce a settlement?

Yes. The guarantee changes nothing about your obligations or your documentation.

What if the tenant isn't credit approved?

Then the guarantee can't be provided, and the security has to be provided some other way.

See how Keyhole Guarantee works for landlords

Go through the terms, the payout basis and what's required before you decide.

Book a conversation

Talk to Daniel about your tenancies and what makes sense for your rental business.