What are Rent Deposit Deeds and what is their relevance in Commercial Conveyancing?

What are Rent Deposit Deeds and what is their relevance in Commercial Conveyancing?

What are Rent Deposit Deeds and what is their relevance in Commercial Conveyancing? Express ConveyancingAre you looking to take up a new Commercial Premise by way of a Lease? Have you been requested either by the agents or the Landlord (especially if this is a private deal) that you are to commit an advanced deposit as security? Then this article is for you.

Unlike Residential Property, commercial does not have the benefit of a regulated and independent deposit protection scheme. Therefore, it is crucial that any advanced Rent Deposits and the terms you have agreed under are correctly (and comprehensively) at the onset of the transaction.

What is a Rent Deposit Deed?

Simply put, a Rent Deposit Deed is a document which outlines the terms under which an advanced rent is collected and held by the Landlord. Strictly speaking, a Rent Deposit Deed will only cover provisions in relation to Rent, variations Can be made to also accommodate dilapidation provisions i.e. would the landlord be entitled to recover any dilapidation related expenses from the rent deposit.

Similar to your deposit on a rental property (residential), once you have agreed a Rent Deposit Deed, the rent in effect remains the property of the Tenant until end of the Term of the Lease. What this basically mean is that, though your money is technically held with the Landlord/and or their agents; they are unable to use/spend the money unless you have been notified in advance and evidence of what these funds will be used for, has been supplied.

From the tenant’s point of view, great care must be taken when you ‘spell out’ how deductions are to be made from the deposit. Any oversights on ‘open ended’ statements could leave the Tenant widely exposed, potentially costing thousands of pounds at the end of the term of the lease.

What happens to the rent in the event of Insolvency?

Since the Rent Deposit Deed acts as a DPS on a residential property, the deposit remains ‘independent’. In the event of either the landlord or tenant going bankrupt, the ‘administrators’ are unable to forfeit these funds meaning the remaining party is always guaranteed their contribution (or the benefit of such deposits).

In the event the tenant is a Company (which is not uncommon), your commercial conveyancing solicitor will register the Rent Deposit Deed at companies’ house within 21 days of completing the lease. Failure to do so will expose the tenant to a liability of £5000.00 (accurate at the time of writing)

Methods of holding the deposit –

Without dwelling too deep in technicalities, the ‘Sums’ of Deposit can be held using the following –

  • Deposit held by the landlord on Trust
  • Deposit held in the name of the tenant but charged to the landlord
  • Deposit held by a third party but charged to the landlord

You can read more details about the various methods of holding the deposit using the following link.

What information does a Rent Charge Deed normally contain –

For those of you who are interested in finding out the basic information details on a Rent Charge Deed, please see below.

This is of course a non exhaustive list –

  1. Details covered on the Rent charge Deed
  2. Landlord’s Details (company/individual) etc
  3. Dare if rent deposit deed
  4. Any Guarantors Details
  5. What is the deposit?
  6. Which method from the three forms of holding the deposit set out above will be used to hold the deposit?

Do you need a Rent Charge Deed prepared?

Our expert Commercial Property Solicitors at Express Conveyancing can help prepare and negotiate a Rent Charge Deed (and your commercial lease).

Please call 0800 799 9892 or use our Contact Form and our New Business Team will contact you as soon as soon as possible.

 

 

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