How much deposit does a Landlord expect?

When taking a lease a tenant may find that they have to provide some level of surety which mitigates the Landlord’s risk of having you as a tenant in their building. This level of surety will depend on the company’s ability to demonstrate its financial ability to cover rent and service charge costs throughout the period of your tenancy. Typically the Landlord will ask you to provide audited accounts which they use to assess your company’s covenant. This request can be very difficult for a new company to satisfy, so tenants will need to factor in this additional cost when looking at conventional leases.

The normal method of surety used by Landlords is by way of rent deposit.  The Landlord and tenant will document  how the deposit is to be held, when it is to be returned and when payment can be taken from it by the landlord.

Normally the rent deposit will be held by the Landlord until the end of the lease but a profits test can often be negotiated whereby assuming the tenant can demonstrate net profits three times the annual rent roll for three consecutive years the deposit and any interest accrued will be passed back to the tenant. If the lease is assigned by the tenant, the new tenant will most likely be required to enter into a new Deposit Deed themselves.

Typically, the rent deposit is a number of months rent, typically 3-9 months depending upon the length of the lease and other relevant factors.

Whilst the tenant will have no access to the rent deposit, which is usually held exclusively by the Landlord, the Landlord should account to the tenant for any interest earned on the money that is held.

The other form of surety sometimes requested by a Landlord is a bank guarantee but the majority of tenants are cautious about this method.