Rent deposit deed

It’s not just residential leases where deposits are paid by an incoming tenant. The same can happen with a new business lease, particularly where the new tenant either can’t provide an appropriate guarantor, or they prove to be unacceptable to the landlord.  As an alternative, a deposit can be taken instead.

What is a rent deposit?

Essentially, a rent deposit is money provided by a tenant to its landlord as security for payment of the rent and performance of the tenant’s covenants as set out in their lease. The agreement will specify and set out the circumstances when the landlord can draw on this money as well setting out any conditions that must be fulfilled when they wish to do this. It’s a useful tool for landlords because, depending on when access to the deposit is triggered, it provides an easily accessible source of money that can be taken as soon as the tenant is in breach of a relevant covenant in the lease. Having this option gives a landlord a very quick and handy alternative to having to take their tenant to court if they’re in breach of their lease.

How much?

There’s no set level or amount on the size of any rent deposit a landlord can take. However, the amount is normally dictated by the rent payable under the lease, how long it might take the landlord to re-let the premises should the tenant default, as well the creditworthiness of the tenant.  It’s not unusual to find the amount taken as a deposit is anything between six and twelve months’ rent.  The amount may also be increased to reflect the fact that a service charge may also be payable under the lease.