• September 13, 2020

Key Takeaways: Factors That Impact the Amount of Security Deposit

Key Takeaways: Factors That Impact the Amount of Security Deposit

  1. The strength of tenant’s Profit & Loss Statement
  2. The strength of tenant’s balance sheet
  3. Tenant’s historical track record
  4. Is it office or retail? “Think” more outlay by a landlord on office deal
  5. Lease term length
  6. Amount of tenant concessions and allowances
  7. Whether tenant is a non-profit or trade association. If so, “think” more S/D and no GGG
  8. Is tenant a newly created shell entity? If so, “think” more S/D
  9. Is tenant foreign entity? If so, “think” more S/D and no GGG
  10. How much “skin” does tenant have in the game?
  11. Are the brokerage commission payments and free rent concessions being spread out or paid (or granted) upfront?
  12. Is S/D based on the 1st year, last year or average base rent amount?
  13. Is tenant requesting a burndown of its S/D?
  14. Is the S/D in the form of a letter of credit or cash (which due to bankruptcy laws, the latter generally equates to significantly greater risk to landlord)?
  15. Will the tenant agree to deposit additional security as the base rent increases annually?
  16. Will the tenant agree to allow landlord, if permissible by law, to co-mingle the S/D?

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