Security Deposits in Ohio Commercial Leasing

The residential security deposit rules mandated by ORC 5321.16—which force landlords to pay 5% annual interest on deposits exceeding one month's rent—explicitly do not apply to commercial tenancies in Ohio.

In the Ohio commercial real estate sector, security deposits are entirely unregulated by statute. They are governed exclusively by the negotiated lease.

Disclaimer: This guide provides general legal information for educational purposes only and does not constitute legal advice. Commercial real estate financing involves complex debt structuring. Always consult a licensed commercial property attorney. Information last verified: March 2026.

No Statutory Limits or Interest Requirements

Because there is no prevailing state law regarding commercial deposits:

1. There is no cap on the amount: A commercial landlord in Columbus or Cincinnati can demand large sums (e.g., three to six months of gross rent) as security.
2. There is no 5% interest requirement: The landlord is totally free to hold a massive deposit without paying the tenant any interest on the funds.
3. There is no legal requirement to segregate the funds: Unless the lease dictates otherwise, the landlord can commingle the cash deposit with their general operating funds.
4. There is no statutory 30-day return deadline: The return process is governed entirely by the contract. If the lease states the deposit will be returned within 60 days after the final NNN reconciliation is audited, courts will enforce that 60-day window.

Holding Commercial Security

Requiring massive upfront cash deposits is often a non-starter for commercial tenants who need that capital for inventory or build-outs. Therefore, Ohio commercial landlords frequently rely on alternative security instruments.

Letters of Credit (Bank Guarantees)

The preferred security instrument for large-scale industrial or retail properties. The commercial tenant's bank issues an irrevocable guarantee. If the tenant defaults on rent or damages the property, the landlord presents the Letter of Credit to the bank and receives an immediate, unconditional payout.

• Advantage: Unlike cash, a Letter of Credit is generally insulated from federal bankruptcy court proceedings if the tenant's business fails, allowing the landlord to recover lost rent immediately.

Personal Guarantees

If the commercial tenant is an LLC or a newly formed corporate entity with few assets, landlords typically demand a "Personal Guarantee." The individual owner signs a contract stating that if the LLC defaults, the landlord can legally pursue the owner's personal assets (bank accounts, home equity) to cover the lease debt.

Managing Complex Commercial Collateral

An expired $100,000 Letter of Credit is worthless when your warehouse tenant files for Chapter 11 bankruptcy. Landager prevents catastrophic loss of collateral by systematically tracking the expiration dates, renewal periods, and specific draw-down thresholds for every unique commercial security instrument in your Ohio portfolio, ensuring your multi-million dollar assets remain constantly protected.

Back to Ohio Commercial Landlord-Tenant Laws Overview.