Western Australia Commercial Security Deposits: Bond Requirements

Commercial security deposits in Western Australia are primarily governed by the terms of the lease agreement. Unlike residential tenancies, there is no government Bond Administrator for commercial leases. The treatment of security differs depending on whether the lease is a retail shop lease or a general commercial lease.

Retail Shop Leases

For leases covered by the Commercial Tenancy (Retail Shops) Agreements Act 1985, the landlord's disclosure statement must detail any security deposit requirement before the lease is signed. The deposit terms must be clearly set out in the lease agreement.

Common Security Forms

• Cash bonds: A lump sum paid upfront and held by the landlord or their solicitor in a trust account.
• Bank guarantees: The tenant's bank provides a guarantee to the landlord for a specified amount. This is the most common form for retail leases, as it avoids tying up the tenant's working capital.

Holding the Deposit

Unlike residential bonds, commercial security deposits are not lodged with a government authority. The landlord holds the deposit directly or through their solicitor's trust account. The lease should specify whether interest accrues and who receives it.

Return of the Deposit

The lease agreement dictates the timeline for returning the deposit. Common provisions include:

• Return within 30 to 60 days of the tenant vacating and completing all make-good obligations.
• Deductions for unpaid rent, outgoings, or make-good costs.

• Final reconciliation of outgoings before releasing the balance.

Non-Retail Commercial Leases

For leases not covered by the Retail Shops Act (industrial, large office, etc.), there are no statutory requirements governing security deposits. The amount, form, and return conditions are entirely negotiated between the parties.

Landlords commonly request deposits equivalent to 3 to 6 months' gross rent (including outgoings) for higher-risk tenants, while established businesses may negotiate a lower amount or provide a bank guarantee.

Best Practices for WA Commercial Landlords

1. Clearly define deposit terms in the lease: Specify the amount, form (cash or bank guarantee), holding arrangements, interest allocation, and return timeline.
2. Require bank guarantees for significant leases: Bank guarantees are more secure than cash deposits and are easier to draw upon in the event of tenant default.
3. Include a top-up clause: If you draw on the security during the lease (e.g., for unpaid rent), require the tenant to restore it to the original amount within a specified timeframe.
4. Document make-good requirements clearly: Many commercial deposit disputes arise from unclear make-good obligations—specify the exact condition the premises must be returned in.

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