Rent Deposit Deed

This is our Rent Deposit Deed for use by a landlord in relation to a commercial lease of premises. A landlord may require a deposit on their property from a tenant to cover:

• rent arrears at the end of the tenancy; and
• costs from the tenant damaging the property – the deposit is collateral against this.

The Landlord must keep the deposit separate from the rent. If the tenant follows the covenants in the lease to the letter, then they can expect the landlord to return the deposit at the end of the lease. So to make this entire process legal, a Rent Deposit Deed is necessary for commercial rentals. It is unlike the deposit scheme in a residential tenancy, in that:

(a) the law does not regulate it; and

(b) it does not need to be in a government-approved deposit scheme.

The rent deposit deed states the amount of deposit money that the tenant needs to give to the landlord at the beginning of the lease. The deed will need to state provisions in which the landlord can draw on that deposit if the tenant defaults. The landlord’s deposit lowers the risk.

Does the deposit need to held in a scheme?

The law of England and Wales states that a business does not have to hold the deposit in a deposit scheme. The money does need to be in a separate bank account though. This is because it is in trust effectively. The tenant may receive the interest at the end of the agreement. However, the deed for rent deposit can also state that the interest will go towards any repairs necessary to the building.

For instance, if the tenant is late or misses a payment the landlord can withdraw money from the deposit account at any time. So this helps to keep the loss the landlord has at a minimum. They would have to return the money to the account if the tenant makes good. The tenant will receive this sum at the end of the lease, if it owes nothing to the landlord.

Does a rent deposit deed count as a charge over money that needs to be registered at Companies House?

The law was that a rent deposit deed was a charge over money that the landlord needs to register at Companies House. This is no longer the case, as the law changed on 6 April 2013. For more details, click here.

Using a template from Legalo

We can provide you with the business and commercial documents you require. Our site is a great DIY source for legal documents, designed to save you significant amounts on legal fees. For a small fee, you are able to download a rent deposit deed and various other templates a commercial landlord may need. Because it is a template, you can change the terms in the deed for your situation. Once both parties have signed the deed, it is legally binding in a court of law. It has been drafted by a UK solicitor, to ensure it is legal. The template document can be saved to your computer for quick and easy access.

At any time you need the rent deposit deed you can reuse it, without paying another fee. Both parties should have copies, so that it they can refer to the deed if the tenant has breached the contract.