Deposit

An amount placed with one party as security against the other’s obligations. Typically in a lease situation where the tenant is of weak financial status (or has little or no trading history) a landlord may ask for a deposit equivalent to a number of months rent, usually 6 months.

This will be held by the landlord (often in a separate bank account) to be drawn down in the event the tenant does not pay rent or defaults on other obligations.

There is usually an obligation for the deposit to be returned when the tenant can produce 3 sets of consecutive annual accounts that show profits at least three times the passing rent.

Any interest accrued will usually remain in the account but be returned to the tenant when the deposit is returned.