security deposit agreement
What are the parts of the Security Deposit Agreement
The Security Deposit Agreement clause requires that payment of security deposit is made to the landlord by the tenant. It protects the landlord from the tenant not paying of the rent or from him or her damaging the property.
The Security Deposit Agreement includes the amount of deposit, the way the deposit is given – by cash or letter of credit as well as how it is held. It could be in terms of an interest bearing account or an noninterest bearing account. It also could be a comingled account or a separate account which is mentioned.
The Security Deposit Agreement also includes the circumstances in which the deposit is usable and can be applied. It stipulates it can be used for nonpayment of rent, damages done to the property, any type of expenses or defaulting under the lease.
Finally the Security Deposit Agreement mentions the balance which needs to be returned and when it needs to be returned.
The tenant should be aware that the interest earned on the security deposit is not normally returned to the tenant when the lease has been terminated and that this is a letter of credit and thus incase the tenant goes bankrupt, this is not part of the bankruptcy estate.
Incase however, the landlord goes bankrupt however, the security deposit of the tenant is lost and the tenant becomes an unsecured creditor and incase there are no funds to pay off these unsecured loans, then the security deposit will be lost.
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- Deposit forfeit or applied towards balance agreement
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