Getting Your Security Deposit Back When Renting Commercial Space

By , Attorney · Santa Clara University School of Law

When your lease comes to an end, either by its own terms or by early termination, you'll be entitled to the return of the deposit, less any sums that the landlord has properly withheld. Many leases do not clearly spell out how and when the landlord will return the money to you, but (as with all lease clauses), you may be able to negotiate on the timing and procedures for the return of your deposit.

Tenant Obligations for the Return of the Deposit

Before returning the deposit, your landlord will probably require you to remove your personal property and move out. The leased space may also have to pass the landlord's inspection if the lease requires you to return the property in its original condition (prior to any improvements or alterations you made). In addition, the landlord may insist that all rent and other monies owed be calculated and paid. These conditions are reasonable and, in turn, enable you to raise some of your own—specifically, the timely return of your deposit.

Timetable for Returning Deposits in Commercial Rentals

You'll almost never see a landlord's lease clause that imposes a time requirement for the return of the deposit. Usually, there's no mention of the issue, which means that legally the landlord is free to return it in a "reasonable" manner, whatever that is.

This is an opportunity for you to press for the prompt return of your deposit. Surely a few weeks should be sufficient, after all inspections and accounting are done, for the landlord to write that check. Especially if your lease requires the landlord to put your deposit ion a separate account (something that you should negotiate for), it should be no great stretch for the landlord to quickly return your money.

Getting Your Deposit Back Early

While you typically won't see your deposit until the end of the tenancy, you may be able to negotiate an early return of the deposit if you establish yourself as a responsible tenant. Bargain for the right to get to get your deposit back early—known as a "burn down"—if you've steadily met your rent obligations over a certain period of time. Or, establish a set of financial mileposts (such as a minimum level of debt) that will trigger a gradual reduction and return of the deposit.

How to Protect Your Deposit if the Landlord Sells the Building

If the ownership of your rental property changes hands, the new owner will be bound by the terms and conditions of your lease. To protect yourself, make sure your lease states that any successor is deemed to have received your deposit and will bear the burden of returning it to you at the end of your tenancy.

This article was excerpted from Negotiate the Best Lease for Your Business by Janet Portman.

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