SECURITY DEPOSIT

New York City landlords require the payment of a security deposit when tenants rent commercial real estate. The security deposit is returned to the tenant at the end of the lease term. The purpose of the security deposit is to protect the landlord from rent payment default.

Landlords base the amount of security deposit on the financial strength and credit worthiness of a perspective tenant. Established companies with strong financial statements pay less security deposit than new ventures that are just establishing their profitability. Security deposits can range from as little as two months rent to as much as a years worth.

The tenant pays the security deposit along with the first months rent upon lease signing. Occasionally landlords require that a security deposit be in the form of a letter of credit.

In order to determine the security deposit, landlords require the last two years of the perspective tenants corporate tax returns and/or financial statements prepared by a CPA. Commercial tenants actively seeking to rent space in Manhattan should have these documents prepared beforehand.