• September 13, 2020

Key Takeaways: Security Deposits from a Tenant’s Perspective

Key Takeaways: Security Deposits from a Tenant’s Perspective

A “burndown” clause essentially states that, so long as tenant in not in default at a particular point in time during the lease term, then tenant’s security deposit will be reduced (either by way of a return of such reduction or by way of a rent credit).

For a letter of credit, upon the burndown date, tenant must provide landlord with the instruments and authorizations required by the issuer of the letter of credit to have the amount reduced.

Tenant Advocates: Ensure that the clause is applicable so long as tenant is not in default “beyond any applicable notice and cure period.”

Tenant Advocates: Negotiate for language stating that, upon receipt of the instruments and authorization from the issuing bank, landlord must promptly execute and deliver an amendment to the letter of credit reflecting the reduced security deposit amount.

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