when renewing a commercial lease should the amount of the security be increased

In Leasing Property - Asked by sheila y. - Apr 20, 2012
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Answer(s)

Christopher T.
Broker/Agent
Los Angeles, CA

The landlord could request a security deposit if the lease expired and there are no options being exercised. In this case the tenant does not enjoy a right to occupy the premises.
If a landlord is requesting additional security deposit it could be because the financial position of the tenant has changed significantly from the previously submitted financials or the landlords experience with the tenant's rent history is dictating a larger security deposit.
If there are options being exercised then you should refer to the lease and related option documents.

Apr 23, 2012
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John C.
Broker/Agent
Sparta, NJ

Are you speaking of an increase because the amount of the lease has increased. Yes the security should increase.

Apr 26, 2012
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Paul C.
Broker/Agent
Toronto, ON

As per my understanding security deposit has nothing to do with rent increase. The security is just a remedy if the tenant abuses the property or damages it which the landlord can use towards repairs.
However, keeping in mind the increased labor costs or incidental charges, the landlord might suggest increase in security deposit and that too if the lease has a clause giving the landlord right to do so.

Apr 26, 2012
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Chris R.
Broker/Agent
Denton, TX

The landlord would want to take a look at all factors involved. The rent history of the tenant is primary - has long as the tenant been in the property and how have they paid their rent? It may also be appropriate to update and take a look at the financials of the tenant just as you might if it were a new tenant in order determine the current level of risk that might be involved. Only after reviewing all of this information would you be in a position to make a determination to increase the security deposit. In some cases - if a tenant has proved their ability to pay - there may be no need to increase the deposit and in fact it may be called upon to return their deposit in whole or in part. All facts and data has to be reviewed in order to make an intelligent decision.

Apr 26, 2012
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Joshua L.
Broker/Agent
Mokena, IL

I represent 3 separate ownerships for 16 commercial property for lease buildings, which we manage & have over 75 tenants and we have never increased the security deposit on a renewal. Instead we charge 1.2x the first months rent for security deposit upfront. Three major factors are considered: 1.) The 1.2x helps to cover future increases in rent and is a ratio that we have figured that works pretty well. 2.) Yes, labor costs do typically increase over time, but you also have to figure in normal wear n tear, which the vacating tenant will not be held responsible for (tenants will typically win this battle in court). & 3.) It is even more difficult to get an existing tenant to renew when you're typically asking them to pay more rent and also throw in there to put up more money towards a security deposit that they have already put into.

May 1, 2012
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Tyler R.
Broker/Agent
Denver, CO

If you are simply renewing your lease, most cases will not call for an increase in security deposit. Your landlord may wish to increase your security deposit if you have failed to perform according to your current lease, however defaulting to the point where your deposit must be increased typically means your business will need to find a new home. The only time the Landlord should ask for additional money on the security deposit beyond what he/she previously collected would be if there were significant improvements made to the space during your lease term, or if the Landlord had to use your deposited funds for repairs in the space.

Jun 5, 2012
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