Rent deposit deeds—key drafting points
Rent deposit deeds—key drafting points

The following Property guidance note provides comprehensive and up to date legal information covering:

  • Rent deposit deeds—key drafting points
  • The deposit
  • Withdrawals from the deposit
  • Where is the money to be deposited?
  • Repayment of the deposit
  • Charging the deposit
  • Trust provision
  • VAT and rent deposits

A rent deposit is a sum of money that is deposited by a tenant when it takes a lease of premises. The deposit acts as security for the landlord against the non-payment of rent or other breaches of the lease terms by the tenant. The money is held on the terms of the rent deposit deed and the landlord has immediate access to funds in the event that the tenant is in breach of the lease.

This Practice Note covers key drafting points to consider when negotiating a rent deposit deed. The points will not be applicable to every situation and often, due to the financial status of the incoming tenant, the landlord will have the upper hand in any negotiations.

This Practice Note does not cover the issues to consider when choosing the structure of a rent deposit deed (eg charge or trust). See Practice Note: Rent deposit deeds—common structures.

The deposit

Rent deposit deeds require the tenant to make an ‘initial deposit’ at completion. This initial deposit is generally defined as a sum equal to a fixed number of months’ rent and, where VAT is payable on the rent, will also include a sum equal to VAT on that rent (see VAT and rent deposits).

The rent deposit deed should include a requirement for the tenant to ‘top up’ the initial