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Tenants Commercial property rental deposit

confirmation of my thinking

Accounting for a commercial property rental deposit from the tenant point of view, a non-current asset?

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13th Mar 2018 16:59

Depends.

How can you be sure it won't be repaid next month ?

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By zocol
to lionofludesch
13th Mar 2018 17:05

My understanding is, its held until the end of the lease. In which case is my thinking correct?
And if they respond differently then current asset for short term or would you book differently?

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to zocol
13th Mar 2018 17:30

Dunno - how long is the lease ?

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By DJKL
13th Mar 2018 17:04

Depends on the terms of the lease re its repayment, we have some that run entire lease term others get released back to tenant in stages after x period, there is no one size.

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By zocol
to DJKL
13th Mar 2018 17:06

Ok I'll double check again with the client.
How do you account if released in stages?

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By DJKL
to zocol
13th Mar 2018 17:21

Same as you would with a loan/HP you were repaying to someone, but in reverse; amount due < I year etc

Just examine the contract and the timing of the repayments/offsets re same.

No idea re down south but if significant/complicated we tend to deal with deposits within distinct standalone agreements rather than in the body of the lease itself, if insignificant /uncomplicated chances are it runs for term/within the lease/licence agreement.

Interesting point, and I don't know if you have tacit relocation re leases in England, but if no notice (by either) given and lease extends for further year this event takes place 40 days pre lease end. (under 2 acres premises)

Accordingly one could have a year end 30 November 2018 with a lease scheduled to end 30 December 2018 but if neither has given notice then term at 30 November 2018 has by default extended to 31 December 2019 and deposit, running in terms of lease,becomes over one year not being due for repayment until lease termination.

(I love tacit, in a flat market do nothing lease keeps going, in a buoyant market negotiate higher rent before 40 day notice)

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13th Mar 2018 17:36

Just write it off, balance of probabilities they will never get it back! (Yes tongue in cheek, but an element of truth in the statement.)

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By DJKL
to Wanderer
13th Mar 2018 18:47

What an affront to my industry, we repay all commercial property deposits where leases run to term, it is only where there are issues (tenant does runner etc) that repayments are withheld.

Doing otherwise within a local market would be short sighted folly, in my twenty years with the business we have had tenants lease with us, go elsewhere, come back to us; you get repeat business from known, trustworthy, tenants by fair dealing.

Maybe the difference is we have existed in our local market, providing commercial property to tenants,since 1975.

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to DJKL
13th Mar 2018 19:29

Don't doubt you at all, unfortunately there are both good commercial landlords & bad ones.
Very common to see excessive dilapidation claims then the deposit eaten up in these & the associated fees.

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By DJKL
to Wanderer
13th Mar 2018 19:54

Dilapidations only kick in re a cash settlement where the tenant has not done/or wanted to do the necessary works to reinstate the property, a detailed photographic schedule and tenants who do the works (which of course means they pay two rents for a period renting both their new office and the one they are vacating) avoids this issue, this in reality is usually a tenant issue as they have behaved like an ostrich.

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By Tornado
13th Mar 2018 20:43

Depending on the circumstances, I think a commercial rent deposit -

a) should be controlled by a Rent Deposit Deed
b) will need to be kept in a separate 'client' account
c) will accrue interest to the tenant to be paid when the deposit is repaid

Whether it is a long term or short term liability will depend on the terms of the Rent Deposit Deed or other agreed arrangements.

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