The subject of Security Deposits invariably comes up in lease negotiations. Landlords want them for a few reasons. 1.They want to have a financial commitment from the tenant. 2. They want to have funds available in the event the tenant defaults. 3. They want to have funds available when the lease expires to cover the cost of any damage to the premises in excess of ordinary wear and tear. 4. They may also need to satisfy their lender's requirements to obtain a security deposit from all tenants. 5. They want to have security deposits to pass along to a new purchaser of the property as a show of the tenants' good faith.
While these may all be good reasons from the landlord's perspective, they do nothing positive for the tenant, except that the tenant may not be able to conclude a lease without posting a security deposit. So now comethe questions of the amount of the security deposit, how long it should remain on deposit and if any interest can be paid to the tenant during the lease term or at the end of the lease. Once again, there are no hard and fast answers. The answers depend on the circumstances. Among the considerations are the cost of tenant improvements paid for by the landlord, the credit-worthiness of the tenant, the conditions of the premises, the market forces (competition), the type and the style of the ownership.
As a tenant rep broker I would always take all of the above into account and then have a frank discussion with the tenant so they know how the landlord is likely to approach the matter. As a landlord's agent, I try to assess the valid need to hold useful funds of a company whose success is very important to the cash flow of the building.
If you are having trouble coming up with any answers concerning security deposits, I encourage you to contact me and I will add an objective perspective that may help.
Comments