When a tenant moves into a rental property, he or she will pay the landlord rent deposits in addition to first month’s rent. This deposit will be returned to the tenant at the end of the lease term, as long as the tenant follows all the terms of the lease agreement.
What is rent deposits?
Rent deposits are money provided by a tenant to its landlord as security for payment of the rent and performance of the tenant’s covenants contained in the lease. Rent deposits deed will specify the circumstances in which the landlord can draw on this money and the conditions that must be satisfied for the deposit to be repaid to the tenant.
Why Landlords like rent deposits?
Landlords like rent deposits because they are easily accessible sources of money that came be drawn upon as soon as the tenant is in breach of a relevant covenant in the lease. Court action is not required to recover the debt or enforce performance of the obligation. Tenants are not generally too keen on rent deposits as they lock up capital, often for a lengthy period.
When will a rent deposit be taken?
Rent deposits will be put in place on the grant of a lease or on the assignment of an existing lease. If the landlord does require a rent deposit it will usually be for one of the following reasons;
- The tenant’s covenant is weak and therefore unsatisfactory to the landlord without some additional comfort
- The tenant may be an overseas company with fe, if any, UK assets
- The tenant is a new business and so is unable to provide evidence of its past good behaviour as a tenant.
When will the rent deposit be returned to the tenant?
The rent deposits will generally be returnable in the following circumstances;-
- Assignment under the lease in accordance with the lease. (On such an occasion the landlord may, if appropriate, want to require a new rent deposit from the assignee.)
- Expiry of the lease term without any holding over under the landlord and tenant Act 1954
- Early termination of the lease by agreement. Early termination by agreement would exclude forfeiture and disclaimer
How can we help?
One of our team members will be able to draft the agreement and advise you on all matters related to commercial rent deposits – who holds the deposit, who is entitled to the interest, when the deposit should be repaid and under what circumstances should the landlord be allowed to deduct money from the deposit. We will use our experience and expertise to ensure that your interests are safeguarded as efficiently as possible.
If you have any specific questions or would like more detailed advice related to rent deposits, then please contact on 01206500181.