Commercial Security Deposits in Saudi Arabia
Understand the contractual nature of commercial security deposits under the Saudi Civil Transactions Law and the role of the Ejar platform.
Legal Disclaimer
This content is for general informational and educational purposes only. It does not constitute legal advice and should not be relied upon as such. Laws change frequently — always verify current regulations and consult a licensed attorney in your jurisdiction for advice specific to your situation. Landager is a property management platform, not a law firm.Information last verified: May 2026.
In Saudi Arabia, commercial security deposits are primarily governed by the Civil Transactions Law (Royal Decree M/191), which became effective on 16 December 2023, and the Real Estate Brokerage Law (Royal Decree M/130). The Ejar regulatory framework serves as the mandatory platform for commercial leases and the neutral custodian for security deposits.
Commercial Security Deposit Regulations
Under the Civil Transactions Law and the Real Estate Brokerage Law, security deposits for commercial properties are subject to specific regulatory oversight to ensure transparency and performance of lease obligations.
- Return of Property (Article 435): The lessee is legally obligated to return the leased property to the lessor upon the expiration of the lease in the same condition it was received, with the exception of normal wear and tear.
- Down Payment Cap (Article 13): Any "Down Payment" (Arboon) paid to secure a commercial lease transaction is legally capped at 5% of the total transaction value. Any amount exceeding this 5% is legally treated as an advance payment of rent rather than a deposit.
- Advance Rent: Landlords may request advance rent payments as part of the commercial agreement, which is governed by the payment schedule in the Unified Ejar Contract.
Custody of Commercial Deposits
The custody of commercial deposits is strictly regulated to protect both parties. While Ejar handles the registration of the lease, the physical holding of the funds is managed through approved regulatory channels.
- Neutral Custody (Article 12): If a real estate broker is involved, they must receive the security deposit (Daman) and deliver it to the Real Estate General Authority (REGA) or its authorized representative (the Ejar platform). The deposit is held by REGA/Ejar as a neutral third party until the property is returned without damage.
- Broker Restrictions (Article 16): A real estate broker is prohibited from using any received deposit for purposes other than those intended and must process all financial guarantees through the approved regulatory channels (Ejar).
- End of Term: Upon lease termination, the refund or application of the deposit is processed through the Ejar system based on the condition of the property and contractual fulfillment.
Alternative Security
Commercial landlords frequently utilise alternatives to cash deposits:
- Bank Guarantees / Letters of Credit: The preferred method for institutional and high-value commercial leases.
- Parent Company Guarantees (PCGs): Common for corporate tenants where a subsidiary is the signing party.
- Personal Guarantees: Often required for SMEs or startups with limited financial history.
Deductions for Commercial Damages
A commercial landlord may seek deductions from the security deposit for:
- Severe damage to the shell or structure of the building (beyond normal wear and tear).
- Unpaid, contractually obligated utility bills.
- Failure to return the property to its original state as required by Article 435 of the Civil Transactions Law.
Normal Wear and Tear
Commercial landlords cannot deduct for standard wear and tear inherent to operating a business (e.g., minor scuffs on warehouse floors or faded paint in a high-traffic retail zone).
Resolving Disputes
If a business disputes the landlord's deduction claim, the process follows a specific regulatory path:
- Expert Review: Disputes regarding damages and deposit deductions are initially referred to specialized experts designated by REGA (Article 12, Brokerage Law).
- Enforcement: If the Ejar contract is used to recover undisputed debts, the Enforcement Court has jurisdiction.
- Litigation: For substantive disputes that cannot be resolved by REGA experts, the Commercial Court (if both parties are merchants) or the General Court handles the ruling.
Commercial landlords typically rely on strict vetting of a company's financial health and contractual protections rather than statutory deposit limits.
Frequently Asked Questions
▶What are the key landlord-tenant laws in Saudi Arabia?
Saudi Arabia has significantly modernized its landlord-tenant laws through the Ejar platform and the Real Estate General Authority (REGA). All rental contracts must be registered on Ejar to be legally binding and enforceable. This guide covers the essential compliance requirements for property owners and landlords.
Read the complete guide▶What is the legal eviction process for landlords in Saudi Arabia?
The eviction process in Saudi Arabia requires landlords to follow formal legal procedures. Valid grounds typically include non-payment of rent, lease violations, or the landlord's personal use of the property. Landlords must provide proper written notice, allow any required cure periods, and may need to obtain a court or tribunal order. Self-help evictions are generally prohibited.
Read the complete guide▶What are the rent increase limits and caps in Saudi Arabia?
Saudi Arabia has specific rules governing when and how landlords can increase rent. These rules may include caps on the percentage of increase, minimum notice periods, and restrictions on frequency. Landlords must comply with all applicable regulations when raising rent on existing tenancies.
Read the complete guide▶What are the security deposit rules and return deadlines in Saudi Arabia?
Saudi Arabia has rules governing how much landlords can charge as a security deposit, how deposits must be held or protected, and the timeline for returning deposits after a tenancy ends. Landlords must provide itemized statements of any deductions and comply with all statutory deadlines to avoid penalties.
Read the complete guide▶What are the mandatory lease requirements in Saudi Arabia?
Lease agreements in Saudi Arabia must comply with applicable national and local laws. Required elements typically include the names of both parties, property description, rent amount and payment terms, deposit details, lease duration, and maintenance responsibility allocation. Written leases may be required for certain tenancy types or durations.
Read the complete guide▶What are the landlord maintenance and repair obligations in Saudi Arabia?
Landlords in Saudi Arabia are generally required to maintain rental properties in a habitable condition, keeping the structure, plumbing, electrical systems, and essential services in proper working order. The specific allocation of maintenance responsibilities between landlord and tenant should be clearly documented in the lease agreement.
Read the complete guide▶What are the late fee and penalty rules for rental properties in Saudi Arabia?
Saudi Arabia has specific rules regarding late fees and penalties for overdue rent. These may include mandatory grace periods, caps on late fee amounts, and restrictions on interest charges. Late fee provisions should be clearly stated in the lease agreement and must comply with local regulations to be enforceable.
Read the complete guide▶What property disclosures are landlords required to make in Saudi Arabia?
Landlords in Saudi Arabia must disclose relevant information about the property to prospective tenants before the lease is signed. Required disclosures typically include known material defects, environmental hazards, previous damage history, and any conditions that could affect the tenant's use and enjoyment of the property.
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