I Thought My Security Blanket Would Always Cover Me! Security Deposits and Prepaid Rent

Written by Melissa McBain
(The Six-Minute Commercial Leasing Lawyer)

The strength of a tenant's financial covenant is, without a doubt, one of the most critical considerations for landlords when entering into a commercial lease. If the financial strength of a proposed tenant is not satisfactory, prudent landlords will request security in one form or another to secure the performance of the tenant's lease obligations. Most commonly landlords seek additional security in the form of third party indemnities/guarantees, letters of credit from financial institutions, security deposits and pre-paid rent. This paper addresses one of the issues surrounding additional security that has recently become the subject of much discussion, that is, will the landlord be able to realize on the security when it may matter the most - in the case of a tenant's bankruptcy or insolvency?

Read the full article Security Deposits Pre-Paid Rent