Commercial Security Deposits in Sweden

Stipulating a form of financial security is a crucial element and industry standard when entering into commercial lease agreements in Sweden. Governed primarily by the Swedish Land Code (Jordabalk 1970:994), which entered into force on 1 January 1972, commercial B2B relationships are characterized by broad contractual freedom (avtalsfrihet), meaning parties are not bound by the same protective statutory caps that govern residential tenancies.

No Statutory Maximum Limits

Swedish law specifies no maximum ceiling for the value of security within a commercial relationship. The parties are free to negotiate based on the principle of freedom of contract (avtalsfrihet).

• The norm when signing a lease agreement with a newly established limited liability company (Aktiebolag) generally ranges from 3 to 6 months of the maximum rent (including base rent, indexation, and tax supplements), depending on the assessed risk.
• If the operating company initially possesses a weak credit rating but requires extreme modifications and customized build-outs to the premises, it is not uncommon for a landlord to demand up to one full calendar year (12 months) of security deposited before granting access.

Types of Accepted Security

In the commercial sector, property owners avoid holding raw cash deposits for administrative, accounting, and bankruptcy-protection reasons. The three absolute most common types of security are:

1. Bank Guarantee ("On Demand")

This is overwhelmingly the most recommended tool for Swedish landlords. Instead of money changing hands, the commercial tenant secures an agreement with their corporate bank. The major bank then issues a binding commitment (Bankgaranti) to pay the landlord within a designated timeframe (often a week) if the tenant fails to make payments. On-Demand guarantees (kravgarantier) are safest for the owner because the bank must disburse the funds strictly upon the landlord's written demand, regardless of whether the commercial tenant protests or claims the demand is theoretically unjustified at that moment.

2. Parent Company Guarantee (Moderbolagsborgen)

When a subsidiary, franchise agency, or branch of an internationally strong, listed retail chain signs a commercial lease, property owners are often satisfied if the well-capitalized national or multinational parent company signs an attached guarantee agreement. This is known as an absolute guarantee (proprieborgen), meaning the landlord can directly pursue the liquid parent company for debts without first exhausting legal avenues against the subsidiary.

3. Escrow / Blocked Accounts (Depositionskonto)

If raw liquid assets are offered, these must formally be locked within an isolated, separate blocked bank account. Under the Escrow Funds Act (1944:181), these funds must be held separately from the landlord's general assets to ensure they are protected and remain the property of the tenant in the event of the landlord's bankruptcy or insolvency.

When Can Deductions Be Executed?

The wording of the guarantee and the precise phrasing in the lease contract upon drafting is crucial. For an on-demand bank guarantee, it is typically determined that a simple written statement from the landlord regarding a missed payment is enough to initiate the bank's liquidation of funds over to the landlord’s financial unit.

The security is most often executable immediately upon:

• Written debt collection notice issued based on unpaid monthly or quarterly invoiced commercial rent.
• Compensation for restoration costs upon move-out that have not been remediated according to the landlord's standard documentation.
• Incurred operational costs during a corporate bankruptcy.

Disputes regarding security deposits that cannot be resolved through mediation at the Regional Rent and Tenancies Tribunal (Hyresnämnden) are typically adjudicated in the District Court (Tingsrätten).

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