Guarantees & surety
Rent Deposit Guarantee
Stands in place of a cash rent deposit on a commercial lease, so the tenant keeps the deposit in the business and the landlord keeps its security.
Boland’s Quay, Dublin · William Murphy, CC BY-SA 2.0
Who it is for
Commercial tenants taking new leases and their agents
What it does
- Replaces 3–12 months’ rent held as cash
- Term matched to the deposit provision in the lease, with landlord consent
- Landlord’s solicitor wording reviewed before issue
- Released on assignment or on satisfactory rent history
The product in full
A landlord granting a new commercial lease to a young company, or to one whose accounts do not yet carry the rent, asks for a deposit — commonly six to twelve months’ rent, held for the term or until a rent history is established. For the tenant, that is a large sum of cash removed from the business at exactly the moment it is fitting out premises and hiring.
A rent deposit guarantee replaces the cash with an insurer’s undertaking. The landlord keeps its security: if rent goes unpaid, it claims under the guarantee up to the stated maximum. The tenant keeps its money in the business, and pays a premium instead.
The wording is where the work is. Landlords’ solicitors draft deposit provisions to sit alongside a rent deposit deed, and the guarantee has to answer the same obligations — rent, service charge, insurance rent, sometimes dilapidations — for the same period, with a release mechanism that actually operates. We read the lease and the deed before issue, and we tell the tenant what its landlord has asked for in plain terms.
Literature
Product literature is issued to appointed intermediaries. Ask your underwriter, or request it through the enquiry form.
- Rent deposit guarantee wordingOn request
- Landlord consent letterOn request
How it works
What happens, in order
From the first enquiry to the point the cover, the contract or the facility is in place.
The lease sets the deposit obligation
The number of months, what it secures and when it is released. The heads of terms usually say whether a guarantee is acceptable in lieu of cash.
We review the lease and the landlord’s wording
Before issue, not after. Where a clause is unacceptable the amendment goes back with a reason the landlord’s solicitor can act on.
The guarantee issues and the lease completes
The tenant signs a counter-indemnity. The landlord takes the guarantee instead of the cash deposit.
Release
On assignment, on the agreed rent history — typically two or three years of clean payment — or at the end of the deposit period.
The numbers
A worked example
Illustrative arithmetic, so the shape of the product is visible rather than described. Nothing here is a quotation or a projection.
Six months’ rent on a £300,000 annual lease
A growing services company takes a Dublin office at £300,000 a year. The landlord requires a deposit of six months’ rent — £150,000 — for the first three years of the term, on its solicitor’s own wording.
The tenant is in band 3, and the directors counter-indemnify.
- Bond value
- £150,000
- Term
- 36 months
- Indicative premium rate
- 1.48% p.a.
- Premium for the term
- £6,660
- Issuance and arrangement fee
- £250
- Wording review fee
- £350
- Total indicative cost
- £7,260
- Cost as a share of bond value
- 4.84% of bond value
How the rate is built
- Base rate — Rent Deposit Guarantee1.30% p.a.
- Financial strength — Band 3 — satisfactory, with some volatility+15%
- Security — Parent or director counter-indemnity−10%
- Wording — Conditional — default must be establishedNo adjustment
- Beneficiary — Corporate employer in Ireland, the UK or the EEA+5%
- Term — 13 – 36 months+5%
The comparison a tenant should make is the total against what £150,000 does in its own business for three years. The wording review fee is charged whether or not the landlord’s form is ultimately accepted.
Cumulative cost against the deposit released
What the guarantee has cost by the end of each year, on the £150,000 deposit above.
View these figures as a table
| Value | |
|---|---|
| End of year 1 | £2,400 |
| End of year 2 | £4,500 |
| End of year 3 | £6,600 |
Suitability
Where the Rent Deposit Guarantee fits
The cases it answers, the cases it does not, and what an underwriter needs before quoting.
It is the right answer when
- A new lease requires a deposit that would take material cash out of the business.
- The landlord will accept an insurer’s guarantee in lieu of cash.
- A tenant is fitting out and needs its capital for the fit-out.
Look at something else when
- The landlord insists on cash held in a designated account and will not vary it.
- The tenant is a start-up with no accounts and no director able to counter-indemnify.
- The lease is short and the deposit is one or two months’ rent, where the minimum premium makes a bond poor value.
What we need to quote
- 1.The lease or heads of terms, and the rent deposit deed.
- 2.The landlord’s required guarantee wording.
- 3.Accounts or, for a young company, directors’ information and the counter-indemnity.
Questions
What brokers ask us about this product
Will a landlord accept this?
Most institutional landlords will, because the covenant behind the guarantee is a regulated insurer rather than the tenant. Raise it at heads of terms — it is much harder to introduce after the deed is drafted.
When is the guarantee released?
On assignment, or on the rent history the lease specifies. We ask for the release mechanism to be written into the wording, because a guarantee with no release provision runs for the whole term.
Does it cover service charge and dilapidations?
Only if the wording says so. Landlords frequently ask for both; each widens the obligation and is priced accordingly.
Spain
In Spain, the same idea for a home: the caución de alquiler
This page describes the guarantee for a commercial lease. For residential lettings in Spain we write a caución de alquiler for the tenant, in place of the bank aval or the extra months in cash a landlord asks for on top of the legal fianza.
It is priced for a household rather than a company, runs for up to 24 months where most of the market stops at twelve, is quoted in real time by the real estate agency in its own secure area on this site and answered within three hours, and is signed by the tenant with a one-time code. Spain only, under the Ley de Arrendamientos Urbanos, for real estate agencies and for brokers who bring an agreement with a chain of agencies.
Request information
Ask us about the Rent Deposit Guarantee
The form reaches an underwriter in Dublin. If you are an intermediary, say so and we will route it to the broker desk.