Cash security deposit under a lease
A reminder to both landlord’s and tenant’s that if a retail premises lease provides that a cash security deposit is payable, then this money must be held by the landlord on behalf of the tenant in an interest-bearing account and the landlord must account to the tenant for interest earned on the deposit, but is entitled to keep the interest and deal with it as money paid by the tenant to the landlord to form part of the security deposit. The party ultimately entitled to the interest on the security deposit will be the party that is ultimately entitled to the security deposit at the ending or sooner determination of the lease. For example, if on the ending or sooner determination of the lease the tenant has not been in breach of the lease, then the tenant will be entitled to the security deposit together with all interest accrued. However, if the tenant has been in breach of the lease and the landlord is entitled to draw on the security deposit, then the landlord will receive the benefit of the interest accrued.