The Security Deposit: How Much Should You Expect to Pay?

The Security Deposit: How Much Should You Expect to Pay?

How much should one expect to pay for a security deposit? Well, like most things in real estate, everything is negotiable. As tenant representatives, we always request that our client not have to pay a security deposit. In the case of some of the largest organizations we represent, we are successful in getting the security deposit removed. This is largely due to the reputation and prowess of these large organizations; most tenants and smaller businesses will, unfortunately, have to pay a month’s security deposit.

Additionally, when a business is new to a given landlord, the landlord may request the security deposit be equivalent to more than one month of rent. How do we work around this? One way is to have your agent find you a location that needs little to no work in order for you to move in. You would be surprised how close one can come to finding something that doesn’t need much work if you’re willing to put in the time and energy to find it. A landlord is going to be a lot less likely to ask for a large security deposit if they aren’t putting a lot of money into improvements to spruce up the space for the new tenant.

Another way to deal with larger security deposit is to have your bank issue a line of credit. Or you could offer up a couple months of rent in place of the security deposit and have those months of rent returned to you at specified intervals (this is something your broker would negotiate for you).

Note, however, and this is of utmost importance: everything must be negotiated upfront. This clause of your lease could make or break which building you choose. Time is money and money is time – so make sure you get everything negotiated before you sign a lease on a new space.

About the Author

Lynn Drake’s status is well known in the industry: She’s the commercial realtor focused on maintaining “true north” for her corporate clients. It’s a reputation built on 35 years of commercial real estate experience. Lynn became a commercial realtor in 2001 after 15 years in corporate real estate. Thus far in her career, Lynn has successfully completed over 1,500 real estate transactions ranging from small business tenant leases to the sale and purchase of industrial complexes.