Building Better Leases Series – Rent: Security Deposit

Building Better Leases

The Security Deposit refers to the amount of money the landlord holds on behalf of the Tenant to protect himself from unpaid rent or damage to the Premises. All security deposits are refundable. The landlord should inform the tenant in advance about the conditions under which he or she will refund the deposit.

  • The Lessee is required to deposit with the Lessor a Security Deposit upon execution of the Lease
  • During the Term to Rent the Lessor can apply the Security Deposit to outstanding rent, to the cost of repairing damage to the Premises caused by the Lessee, or to any other obligation of the Lessee
  • If the Security Deposit is reduced as a result of the offsets mentioned above, then the Lessee is required to restore the original amount of the Security Deposit
  • In the event of an increase in Base Rent, the required Security Deposit is increased by the same percentage
  • In the event of a change of use, sublease or assignment, the Lessor, in his reasonable judgment, can increase the Security Deposit to account for any additional wear and tear
  • If in the Lessor’s reasonable judgment, the financial condition of the Lease is reduced after a change in control of the Lessee, then the Lessor can increase the Security Deposit to a commercially reasonable level
  • The Lessor is not required to keep the Security Deposit separate from his other accounts
  • Within 90 days after the expiration of the Term, the Lessor shall return any unused portion of the Security Deposit to the Lessee
  • The Security Deposit does not bear interest