Commercial Security Deposits in Egypt: Practices and Clearances

In Egypt's commercial real estate sector—governed by the free-market principles of the Egyptian Civil Code (Law No. 131 of 1948) and restored to freedom of contract via Law No. 4 of 1996 (effective 31 January 1996)—security deposits are a matter of private negotiation.

Historically, under the "Old Rent" system (Law No. 49/1977 and Law No. 136/1981), a 2-month deposit cap applied to both residential and non-residential units. However, for "New Rent" leases signed after 1996, there are no statutory caps on commercial deposit amounts. Furthermore, Law No. 164 of 2025 has mandated that all remaining "Old Rent" commercial leases must transition to market-based Civil Code terms over a 5-year period ending in 2030.

Standard Commercial Deposit Amounts

Because commercial leases are governed by the principle of "Pacta Sunt Servanda" (Article 147 of the Civil Code), the contract is the law of the parties. Landlords possess discretion in setting deposit requirements to secure the lease.

• Typical Range: Market standards typically range from 2 to 3 months for office spaces and 3 to 6 months for retail or industrial units.
• Security Requirement: Under Article 589 of the Civil Code, a lessee is technically bound to provide enough value (furniture or cash) to secure the rent for two years, though parties usually agree on the cash deposit amounts mentioned above.
• Upfront Rent: It is also standard practice for landlords to require 1 to 3 months of rent paid in advance upon signing.

Handling the Funds

There are no federal banking regulations in Egypt requiring a commercial landlord to hold a security deposit in a separate, interest-bearing escrow account.

The landlord receives the funds and holds them within their corporate or personal accounts. Under the Civil Code, a commercial tenant generally does not have the right to claim accrued interest on the deposit unless specifically agreed upon in the lease contract.

The Critical Prerequisite for Return: The Mokhalsa

The security deposit is primarily designed to cover physical damages beyond standard wear and tear (Article 591 of the Civil Code), which requires the lessee to restore the property to its original condition. However, its most critical use in Egypt is safeguarding against unpaid corporate utility bills.

Utility debts in Egypt are administrative liabilities attached to the specific utility service point or meter. Because utility providers (Electricity, Water, Gas) will refuse to transfer service or reconnect a new tenant until all debts associated with the property's meters are settled, landlords are practically liable for a previous tenant's arrears. Therefore, the refund is contingent upon the tenant providing a "Mokhalsa" (Official Clearance Certificate).

The Clearance Process

1. Upon termination, the tenant must visit local government utility offices (Electricity Distribution Company, Water Authority, Gas provider).
2. The tenant must pay all outstanding balances and obtain an official, stamped Mokhalsa document definitively proving a zero balance for the property's meters.
3. The landlord will withhold the entirety of the deposit until these physical clearances are presented.
4. If the tenant fails to provide clearances, the landlord is legally entitled to apply the deposit funds to settle utility debts directly, refunding only the residual balance.

Deductions and Timelines

The lease agreement should dictate the precise timeline for return. Under Law No. 165 of 2025 (amending Law 4/1996), lease contracts notarized with an "Enforcement Clause" (Sigha Tanfizya) serve as an executive deed. This allows landlords to proceed directly to the Enforcement Department for rent collection or eviction upon breach, bypassing the lengthy Summary Court process.

Valid Deductions typically include:

• Unpaid base rent or accrued late fees.
• Outstanding utility bills, property taxes, or unpaid compound maintenance fees (Wadeea).
• Costs to repair physical damage beyond normal wear and tear (Article 591).
• Restoration costs if the contract requires the property be returned in its original "shell and core" state.

Manage the financial handover of commercial properties using Landager. Securely digitize and store uploaded Mokhalsa utility clearance documents directly to the tenant's profile, track total deposit amounts held across large portfolios, and clearly document and itemize any necessary deductions upon tenant exit with automated reporting.

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