You might think…

“When something goes wrong, I’ll just take it from the deposit.”
It’s not that simple. A landlord can only use the deposit under clearly defined conditions – and even a commercial tenant is legally protected against arbitrary deductions.

Clients ask me…

“Can I deduct unpaid rent from the deposit?”
“What if the tenant leaves early and there’s damage?”
“Do I have to return the deposit even if the lease ended prematurely?”

The answers depend on the wording of the contract and whether the breaches were proven and documented.

Legal background

The Civil Code (Section 2254 for residential leases; in commercial leases, the rules are based on the contract and general provisions) states that a security deposit serves to secure the tenant’s obligations – usually rent, service charges, and damages.
For non-residential premises and commercial leases, the amount and purpose of the deposit are purely contractual. If the lease clearly defines what the deposit can be used for, and such obligations have arisen, the landlord can deduct it.

Key conditions:

• The obligation to provide a deposit must be agreed in writing.

• The use of the deposit must match the agreed purpose.

• Any deduction must be accounted for and documented (invoices, photos, inspection reports).

Common mistakes and risks

• Unclear definition of the deposit’s purpose – may prevent deduction.

• Using the deposit without proper accounting – tenant can challenge it in court.

• Deducting unproven damages – courts may reject the claim.

• Using the deposit as a “hidden penalty” – often deemed invalid by courts.

Step-by-step process

1. Before lease termination, carry out an inspection and create a written condition report.

2. Calculate any claims (debts, damages) and gather evidence.

3. Prepare a written deposit settlement.

4. If the deposit does not cover the full amount, request the balance from the tenant.

5. Return any unused deposit without undue delay.

Real-life example

A company ended its warehouse lease but failed to remove part of its equipment, blocking the space. The landlord used part of the deposit to cover dismantling and removal costs. With photo documentation and an invoice from the moving company, the tenant’s complaint was unsuccessful.

Why be cautious with “your own rules”

Without a clear contractual basis and evidence, you risk having to return the deposit even in case of actual damage. Disputes over commercial deposits often drag on for years and end up in court.

Lawyer’s checklist

✅ Clearly define the deposit’s purpose in the contract.
✅ Always prepare a handover protocol when the lease ends.
✅ Document and account for any use of the deposit.
✅ Return unused deposit promptly to avoid interest penalties.

FAQ

Can the deposit be used for unpaid rent?
Yes, if this is expressly stated in the contract.

Do I need to account for the deposit even if I deduct it?
Yes, otherwise you risk a legal dispute.

Is there a legal limit on the deposit in commercial leases?
No, the amount is a matter of agreement between the parties.