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Are security deposits required on commercial leases?

On Behalf of | Jun 29, 2016 | Landlord / Tenant |

When you try to get a commercial lease, you’ll likely be asked for a security deposit. This is often the same as rent for one or two months, to be paid up front. You then get it back at the end of the lease, minus any that had to be taken out due to damage to the property.

While a landlord can ask for a deposit, it’s important to know that it’s not required by law. You can get a space without any deposit at all.

Even if the landlord demands one, since there are no laws stipulating what has to be paid, this also opens up the door for negotiation. You can offer to pay a deposit amount that you believe is fair, even if it’s under what the landlord wants, and try to reduce the amount of money that you need up front to get into the space.

As you can imagine, this is huge for small business owners. The less you have to pay up front, the more you have for renovations and stock. You may also just have more of a cash buffer so that you can keep the business afloat during those crucial first months being open.

If you do pay a deposit, surrendering some of your cash flow, it is important to know what laws govern the repayment of this deposit. For example, landlords are not supposed to take money out for normal wear and tear on the space, and they only have so long to pay you back what is owed. If this agreement is breached, you do have legal options you can exercise in California.

Source: MultiBriefs, “Dealing with deposits for commercial tenants,” Dale Willerton and Jeff Grandfield, accessed June 29, 2016