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Security Deposit
Practical Law Glossary Item 1-546-6125 (Approx. 3 pages)
Glossary
Security Deposit
In a leasing context, a sum of money paid by a tenant and held by a landlord during the lease's term. A security deposit is held to offset the damages the landlord may suffer as a result of the breach of the tenant's lease obligations either during or at the end of the lease term.
The damages can arise from acts or omissions of the tenant or the tenant's agents, including:
- Physical damage to the leased premises or the building.
- Failure to pay rent and other sums owed.
- Failure to perform any restoration obligation under the lease before surrendering the leased premises to the landlord.
- Failure to vacate the leased premises at the end of the lease term.
- Theft of the landlord's property.
A security deposit can be in the form of cash or a letter of credit.
The amount of the security deposit may decrease over the lease term, which is known as a burndown.