Should a security deposit be placed in a commercial lease?

Verified 25 July 2023 - Legal and Administrative Information Directorate (Prime Minister)

A security deposit is a sum of money paid by the tenant (called lessee) to guarantee the owner (called lessor(b) the proper execution of the lease (such as payment of rent or maintenance of the premises). The payment of a security deposit is not mandatory. This amount is normally returned to the tenant at the end of the lease.

The payment of a security deposit is not mandatory.

The amount of the security deposit is freely determined by the parties. In practice, it amounts to one of the following amounts:

  • 3 months rent if the rents are payable in advance
  • Or 6 months rent if the rent is paid at the end of term

If the amount of the security deposit exceeds 2 terms of rent, the landlord must pay the tenant interest at the rate applied by the Banque de France for advances on security.

In all cases, the lessor must not charge the customer (or tenant) VAT on the amount of the security deposit.

Please note

The lease contract generally provides that the security deposit corresponds to 3 months of rent. Consequently, the security deposit is revised at the same time as the rent and/or when the lease is renewed.

The security deposit must be refunded to the tenant when he leaves the premises.

The law does not provide for no maximum delay for the refund of the security deposit. However, the time limit for repayment of the security deposit is often specified in the commercial lease agreement.

The tenant must return the premises in good repair condition. If the tenant does not fulfill his obligations and makes the premises degraded, the owner can freely keep - partially or in full - the sum of the security deposit depending on the work necessary to effect a restoration of order of the property.

FYI  

The commercial lease often provides that the tenant is required to pay the rent until the end of the contract and that the security deposit is not deducted from the rent.

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