Q&As

Are there any general principles regarding retaining rent deposits following forfeiture? If it will be difficult for a landlord to re-let, can it offset any lost rent against the rent deposit?

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Published on LexisPSL on 24/04/2017

The following Property Q&A provides comprehensive and up to date legal information covering:

  • Are there any general principles regarding retaining rent deposits following forfeiture? If it will be difficult for a landlord to re-let, can it offset any lost rent against the rent deposit?
  • The rent deposit deed
  • Forfeiture

For the purposes of this Q&A, we have assumed the rent deposit is in relation to a commercial property.

The rent deposit deed

A rent deposit is a sum of money that is deposited by a tenant when it takes a lease of premises as security against the non-payment of rent and other breaches of the lease.

The money is held on the terms of the rent deposit deed. Rent deposit deeds provide landlords with immediate access to funds in the event that the tenant is in breach of the lease. In many cases the definition of liabilities under the deed extends to the costs of enforcement.

The rent deposit deed will state exactly when the landlord is entitled to draw on the deposit. Such circumstances usually include where there are:

  1. outstanding amounts due under the lease ie for rent, insurance, service charge

  2. sums due for losses or costs due to tenant’s breach

  3. outstanding bank charges relating to the protection of the rent deposit deed

  4. sums due for tax liability arising from the operation of the deed

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