Nunavut Commercial Security Deposit Laws

Unlike residential tenancies in Nunavut where security deposits are strictly capped and regulated, commercial security deposits are entirely a matter of contract law.

Disclaimer: This guide provides general legal information for educational purposes only and does not constitute legal advice. Commercial real estate law is complex. Always consult a licensed attorney in Nunavut for advice specific to your situation. Information last verified: March 2026.

No Statutory Limits

In Nunavut, there is no legislated maximum for a commercial security deposit. A commercial landlord can require any amount they deem necessary to offset the financial risk of a tenant defaulting on a highly customized, expensive commercial space.

Standard Market Practices:

• For standard office or retail spaces, deposits of 1 to 3 months' gross rent are common.
• For specialized industrial spaces or restaurants requiring significant tenant improvements or specialized exhaust/plumbing, landlords may require deposits equivalent to 6 months' rent or more.

Irrevocable Letters of Credit (LOC)

Because commercial security deposits can be very large, it is increasingly common for commercial landlords in Nunavut to accept an Irrevocable Letter of Credit (LOC) from the tenant's bank instead of a cash deposit.

An LOC is a guarantee from a financial institution that, should the tenant default on the lease, the bank will immediately pay the landlord the specified amount upon demand, bypassing the need to seize funds directly from a struggling tenant.

What Can Be Deducted?

The commercial lease must explicitly state what the security deposit can be used for. Without clear wording, landlords may face legal challenges when attempting to withhold funds. Common and necessary inclusions in the lease language state the deposit can be applied toward:

1. Unpaid base rent or additional rent (CAM, taxes).
2. The cost to repair damage to the premises beyond normal wear and tear.
3. The cost of restoring the premises to their original "base building" condition if the tenant leaves unauthorized improvements.
4. Legal fees incurred by the landlord to enforce the lease due to the tenant's default.

Return Deadlines and Interest

Return Deadline: There is no statutory "10-day" turnaround for commercial deposits as there is for residential. The commercial lease dictates the timeline. Often, commercial leases stipulate the deposit will be returned within 30 to 60 days after the lease expires, giving the landlord ample time to assess the property, finalize the year-end reconciliation of operating expenses (CAM), and confirm all final utility bills are paid.

Interest: Landlords are not legally required to pay interest on commercial security deposits unless it is explicitly negotiated and written into the lease agreement. If the landlord does agree to pay interest, the rate and calculation method must be clearly defined.

Best Practices for Landlords

1. Be specific in the lease: Define exactly when the deposit can be drawn down, what constitutes a default triggering the draw, and the tenant's obligation to replenish the deposit if it is used during the tenancy.
2. Consider LOCs for high-risk tenants: If a tenant is a startup or requires massive upfront capital improvements from the landlord, an LOC provides superior protection over cash, especially in the event of tenant bankruptcy.
3. Conduct thorough exit inspections: Always document the state of the commercial property upon the tenant's exit with a signed inspection report to justify any deductions.

How Landager Helps

Landager's commercial platform allows landlords to accurately track cash security deposits and Letter of Credit expiration dates for their entire commercial portfolio, ensuring they notify tenants well in advance to renew expiring LOCs.

Back to Nunavut Commercial Landlord-Tenant Laws Overview.