Security Deposits in Commercial Real Estate in Ukraine

Securing the performance of obligations (particularly in the form of a guarantee payment or security deposit) is an absolute standard in the field of commercial leasing in Ukraine. It is the very first and most important financial safety cushion for the owner of an office center, a large warehouse complex, or a restaurant space, where the risks of property damage or sudden bankruptcy of a tenant company run into tens of thousands of dollars.

Disclaimer: This information is provided exclusively for educational purposes. The fiscal status and legal nature of the guarantee payment (as described in the contract) drastically affects the taxation of your business in Ukraine. Always engage corporate lawyers. Last updated: March 2026.

1. Deposit Size and Its Economic Nature

Unlike the residential sector, where the deposit is usually equal to one month's rent, rates in the commercial real estate market (especially for large corporations in Kyiv, Lviv, or Dnipro) are often higher:

• For office spaces and small retail, the standard is a security deposit equal to 1-2 months' rent.
• For retail spaces in premium shopping centers, large manufacturing shops, or food and beverage (HORECA) premises where the tenant installs extremely heavy equipment or does a total redevelopment, the landlord may demand a deposit equivalent to 3-6 months' rent (always pegged to a foreign currency equivalent).

Legal Classification (Crucial for Tax Purposes): The money transferred to the owner may be named differently in the contract, and this determines accounting (VAT and income tax):

1. "Advance Payment" (for the last month): If the amount is treated as an advance, it instantly becomes subject to taxation for the landlord at the moment of receipt (VAT must be accrued immediately and income recognized for the single tax or corporate income tax). This is the least convenient financial route.
2. Security (Guarantee) Payment: The legally correct formalization, based on Articles 546 or 560 of the Civil Code. The essence is that this sum acts exclusively as "insurance." It is not credited as rent payment over the entire term of the lease agreement but sits in the landlord's account until the last day. Only in this case might the State Tax Service agree not to tax it on the day of transfer (since it is not revenue, but merely a guarantee).

2. Withholding Funds and Covering Damages

A commercial lease agreement must exhaustively detail when the landlord has the right to debit (confiscate) money from the deposit. This usually happens without the tenant's consent ("by way of unilateral extrajudicial set-off of counterclaims") in the following cases:

• Arrears on rent exceeding X business days.
• Catastrophic failure to pay utility bills or operational expenses (OPEX / Management Fees).
• Compensation for inflicting physical damage on the premises itself (smashed storefronts, demolished drywall, destroyed industrial ventilation).
• Contractual Penalty (Fine): It is a common phenomenon (especially in professional malls) to include a clause under which the entire security deposit acts as a 100% irrecoverable penalty if the tenant (business) decides to prematurely and unilaterally terminate the long-term contract and move out (e.g., due to a crisis) without advance notice (often 3-6 months).

"Top-up" Obligation: Commercial contracts almost always contain a rule: if the landlord legally debited part of the deposit (for example, to cover an electricity debt), the tenant is obliged to fully restore and top up the security deposit to its initial full amount within a very short period (e.g., within 3-5 banking days).

3. Procedure for Returning the Security Payment

During the final handover of the premises to the owner, strict corporate standards apply:

1. Official Handover Act: A detailed Acceptance-Transfer (Return) Act is signed. The premises must be returned in the same condition as it was received (excluding agreed-upon normal wear and tear). If the tenant was obligated (per the contract) prior to moving out to remove all their glass partitions, patch holes in the ceiling, and plaster the walls ("restitution to Shell & Core condition"), they must complete this before signing the Act.
2. Timeframes for Return: If the tenant has faithfully paid all bills and left no destruction, the deposit is subject to mandatory refund. In B2B practice, this does not happen "on the day the keys are handed over," but is delayed by 10-30 business days, because the owner (or their management company) needs time to receive the final consolidated utility bills from service providers.

Landager radically transforms the management of security deposits for the B2B real estate segment. The corporate dashboard clearly segregates operational cash (for tax purposes) from frozen guarantee funds (deposits liability). A property management owner can, in two clicks, reconcile the daily balance value of a guarantee payment against the current currency equivalent, automate invoicing for its "rapid top-up" following penalty deductions, and ensure a transparent and legally backed digital audit trail during scheduled inspections by the State Tax Service of Ukraine.

Next: Eviction Process for Commercial Tenants