Rent Deposits & Guarantees
In brief, a rent deposit is money paid to a Landlord by a Tenant to act as security for payment of the rent and performance of the Tenant's obligations throughout the lifetime of the Lease. If the Tenant does not pay their rent or defaults in some other way causing expense to the Landlord, they can look to use the monies held as a rent deposit to rectify this.
A rent deposit for a Commercial property does not need to be held in a Tenancy Deposit Protection Scheme like residential property, but there may be stipulations in the accompanying Rent Deposit Deed that state it has to be held in an interest bearing account, with the interest belonging to the Tenant when the Rent Deposit is returned at the end of the Lease term. If you want to collect a rent deposit from your tenant, it is important that this is document.
It is also an option for a Landlord to require a Guarantee before entering into a Lease so that the obligations of the Tenant are effectively backed-up by a third party. This is key when leasing a property to a Company that does not have a strong financial history or to a start-up company as if the company becomes insolvent there will be nobody to pursue any debts against. In this situation, a personal guarantee can be sought and Gepps can help you to achieve a level of protection that you feel comfortable with.
A recent project that our team has been involved in which incorporated the above is:
- A new 10-year Lease of a fitness studio, including a Rent Deposit Deed and Licence for Alternations for a new start-up company.