Commercial leasing
Security deposits and bank guarantees in a commercial lease.
The security you give for a lease ties up money or exposes you to risk for the whole term, and getting it back is not automatic. CMK Legal in Richmond advises tenants and landlords across Victoria on bonds, bank guarantees and personal guarantees, and on recovering security at the end or on a sale.
Solicitor-reviewed
Security terms reviewed by a Victorian commercial lawyer.
Fast turnaround
Advice back within 2 to 3 business days in most cases.
Fixed fee, quoted first
Fixed fee, quoted before we start.
Victorian leasing law
Grounded in the Retail Leases Act 2003 and VCAT practice.
The forms security can take.
Security for a lease usually takes one of three forms: a cash deposit, a bank guarantee, or a personal guarantee from the individuals behind a company tenant. Each ties up money or exposes a person to risk for the length of the term.
A bank guarantee is often preferable to an open-ended personal guarantee because its amount and duration are defined, although it is not free for a tenant to put in place.
For retail premises the Retail Leases Act 2003 (Vic) regulates security deposits, including their return once the tenant has met its obligations, so the retail or non-retail question again shapes the position.
When a landlord sells, a security deposit is treated as a personal obligation of the original landlord rather than something that automatically binds the new owner, so how the deposit is dealt with at a sale matters.
Why the security terms matter.
The right form of security is chosen
A defined bank guarantee and an open-ended personal guarantee expose you very differently. Choosing between them before signing is easier than unwinding the wrong one later.
Amount and duration are negotiated
How much security, and for how long, is usually open to negotiation. A cap and a release point keep the exposure in proportion to the risk.
Return on exit is secured
For retail premises the Act regulates the return of a deposit once obligations are met. Dealing with the mechanics up front avoids chasing the money at the end.
A sale of the building is planned for
A deposit is a personal obligation of the original landlord, so how it is handled when the property is sold decides whether you can recover it from the new owner.
Getting the security back is not automatic.
Security for a lease usually takes one of three forms: a cash deposit, a bank guarantee, or a personal guarantee from the individuals behind a company tenant. Each ties up money or exposes a person to risk for the length of the term, and each behaves differently when the business or the building changes hands. A bank guarantee is often preferable to an open-ended personal guarantee because its amount and duration are defined, although it is not free for a tenant to put in place.
Recovering the security at the end is not a given. For retail premises the Act regulates security deposits, including their return once the tenant has met its obligations. A point that catches tenants out is what happens when the landlord sells. A security deposit is treated as a personal obligation of the original landlord rather than something that automatically binds the new owner, so a deposit that was not actually handed over at the sale can be difficult to recover from the purchaser. Where a lease is assigned, release of the outgoing tenant's security is a separate question that needs to be dealt with in the assignment documents rather than assumed.
Talk to us if.
- A bank guarantee is being demanded
- A personal guarantee is sought from a director
- Your bond has not been returned at the end of the lease
- The building has been sold and the new owner will not refund the deposit
- You want a cap or a release point on a guarantee
- You are assigning the lease and want your security released
- You are a landlord and want the security drafted to survive a sale
- The amount of security being asked for looks excessive
Security is easier to shape before signing than to recover later. If a deposit has not been returned, we can tell you what the lease and the Act require.
How we help with security.
- 01
Send us the documents
The lease, the guarantee or bank guarantee wording, and any correspondence about the deposit.
- 02
Scope and fixed fee
We confirm whether the Retail Leases Act applies, scope the work and quote before starting.
- 03
Review the security terms
The form, amount, duration and return of the security are read against the lease and the Act.
- 04
Talk it through
We explain the exposure and the points worth negotiating or pressing, by phone.
- 05
Act if instructed
If you want us to, we take the points to the other side or pursue the return of a deposit.
Fixed fees for security advice.
Advice on a security deposit, bank guarantee or personal guarantee is quoted as a fixed fee once we have seen the documents, with a call included. Recovering a disputed deposit is quoted separately before any cost moves.
FAQs
Security deposit FAQs.
Still unsure? Call us on (03) 9008 7224 and speak to a lawyer, not a call centre.
What is the difference between a bond and a bank guarantee?
When do I get my security deposit back?
Who holds my bond if the building is sold?
Can I give a bank guarantee instead of a personal guarantee?
Is my security released when I assign the lease?
Related services.
Guarantees & guarantor release
Capping a personal guarantee and releasing a guarantor on assignment.
Learn moreLease negotiation
We negotiate rent, incentives, options and repair clauses with the other side.
Learn moreLease assignment & transfer
Transferring a lease when a business is bought or sold, with consent handled properly.
Learn moreRetail Leases Act advice
Whether the Act applies to your premises, and what it changes for both sides.
Learn moreGet the security terms right.
Start online or book a consultation with a CMK Legal commercial leasing solicitor in Richmond, Melbourne.