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In the Spotlight: Eight Ways Tenants Can Rewrite a Landlord's Security Deposit Clause
Landlords commonly require tenants to pay a security deposit at the beginning of the lease term. This payment is expected to be made in addition to monthly rent payments. A security deposit protects a landlord in the event a tenant is in default under its lease. It can cover non-payment of rent or any other damages caused by a tenant's noncompliance with leasehold obligations. There are at least eight revisions that a tenant can make to a landlord's “standard” security deposit clause that can protect its interests as well.
Model Language
Security Deposit. Tenant shall deposit with Landlord on or before the Commencement Date, the Security Deposit set forth in the Summary Sheet, if any, as security for the performance of Tenant's obligations under this Lease, including without limitation, the surrender of possession of the Premises to Landlord as herein provided. The Security Deposit shall (without notice or demand) automatically increase throughout the Term on each date that the Base Rent increases to provide Landlord at all times with a Security Deposit equal to ___ (__) months of the then Base Rent amount. If Landlord applies any part of the Security Deposit, including any Security Deposit not directly deposited with Landlord but transferred to Landlord in connection with the purchase of the Building, to cure any default of Tenant, Tenant shall on demand deposit with Landlord the amount so applied so that Landlord shall have the full Security Deposit on hand at all times during the Term. Landlord, in the event that the Premises are sold, shall transfer and deliver the Security Deposit, as such, to the purchaser of the Premises and shall notify Tenant thereof, and thereupon Landlord shall be discharged from any further liability in reference thereto. Tenant shall not be entitled to any interest on the Security Deposit and Landlord shall have the right to commingle the Security Deposit with its other funds.
Savvy tenants know that landlords will accept certain revisions to this “standard” clause. Most tenants also understand that “if they don't ask for it, they won't get it.”
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