Guidance on Commercial Rent Deposits

• There is no prescribed amount required for a rent deposit; however, they are usually between six to twelve months' rent. The value of the rent deposit will be determined by the value of the rent under the lease, the period taken to re-let the property and the risk of the tenant defaulting on their rent.

• Landlords may be authorised to deduct from rent deposits if there is: unpaid rent, insurance rent and service charges, if a landlord suffers a loss due to a breach of any covenants in the lease or if the lease is terminated earlier than the term. It is deemed reasonable for a landlord to give notice to the tenant before making any deductions so that they can rectify any action(s) that have triggered a deduction.

• Repayment of a rent deposit may be negotiated between a landlord and a tenant. A lawful assignment, an expiry of the term, a surrender or an option to break in a lease may trigger the repayment of a rent deposit to a tenant. A tenant may also prove that they can meet their financial obligations under the lease to receive their rent deposit back.

The terms on which a landlord can draw from a rent deposit, how it is to be held, and the conditions that must be satisfied for the monies to be repaid to the tenant must be set out in a rent deposit deed.

The assistance of a solicitor can be obtained to draft this document to ensure that it is a valid document tailored to the circumstances of the individuals.