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Two months' rent deposit is standard for most commercial leases. Exceptions to this rule come into effect when the landlord's risk increases. That means either the landlord is spending a lot of money to build the space for the tenant or the tenant may have some difficulties paying the rent (or both).
It could be that the landlord is hungry enough for your tenancy that they are willing to forgo a deposit (especially if you do not have a real estate agent so the landlord is not paying a commission).
This scenario can also happen for extremely creditworthy tenants.
2 - Two months, applied to the first two months coming due under the lease. This way the landlord is guaranteed to achieve two months worth of rent and the amount is exhausted quickly so the landlord does not hold on to your money during the term and any renewals.
3 - First and last months' rent. One month being held for the term of the lease and applied to the last month of rent due is the most common deposit.
If you achieve this and end up renewing the lease, there will be no deposit on hand for the renewal term. Since most tenants forget about their deposit, it is a nice surprise to know that you get a freebie during the last month of your term.
4 - First and security deposit. While this is the same amount (two months' worth), the security month will be held by the landlord indefinitely.
Two problems arise from this scenario:
One - let's say that you stay in the property for 20 years (5 year lease and you renew it 3 times at 5 years each) - that is a long time for a landlord to be holding on to your money and it not be put to use for you.
Secondly, especially during a long term scenario, it is easy to completely forget about a security deposit. You end up paying your last month of rent, move out and have totally forgotten about the security deposit.
Even if you remember it, now you have to actively chase the landlord to get it back.
5 - One month of security deposit. Generally this is very similar to first and security, as most leases do start very soon after the execution of the lease. We see this very commonly in retail leases, shopping mall leases in particular.
Generally, no. But it depends on what is stated in the lease.
The most favorable tenant security deposit clause will specifically state that the security deposit is due only after BOTH parties execute the lease.
We get asked all the time: Do I have to provide a security deposit on my lease renewal?
Typically - no. The security deposit will survive your lease renewal and it should suffice for the landlord during the renewal term.
If the base rental rates have increased substantially, then the landlord could make the case that the security deposit is less than a month of rent. In this case, they may ask you to "top up" the security deposit, but you are not obligated to do so if the security deposit clause does not mention it.
1) Exhausting large deposits. Let's say the money the landlord is contributing to a tenant improvement allowance is substantial and the landlord therefore wants a large deposit (say 4 to 6 months' worth).
Rather than accepting first and last 5 months' worth, it would be more tenant-friendly to push some of the months at the beginning and the middle.
For instance, first 2 months' rent, 13th and 14th months' rent, and last 2 months' rent would be a better solution than first and last 5.
2) Interest bearing account - is the landlord willing to provide interest?
If you sign a 10 year lease, that is a long time for a landlord to hold on to your money.
3) Before a landlord applies a security deposit to a damage, do you have the right to cure?
4) Is the deposit "evergreen", requiring it to be replaced if used by the landlord?
5) Can the landlord comingle the deposit or is it in trust for the tenant?
6) Are the mechanics set up to transfer it to a new owner if the landlord sells the building?
7) Is the deposit held by the listing agent or the tenant's broker prior to the lease becoming a firm and binding document?
8) Is the landlord asking for a personal guarantee? If you can avoid a personal guarantee, then it likely will come at the price of inducements (such as free rent or a tenant improvement allowance), or in the form of an increased deposit. We advised a client in New York who had this decision to make from his shopping mall landlord - either sign the personal guarantee, or agree to a 6 month security deposit.
9) Does the security deposit automatically increase if you sublet your premises? We have seen plenty of cases (most particularly in leases from California and Texas) in which a sublet results in you having to increase the security deposit.
10) What happens to the security deposit if the landlord sells the building or assigns the lease? Does the security deposit get transferred to the new owner or does a new deposit have to be submitted?