Victoria Commercial Security Deposit Rules: Bonds, Bank Guarantees, and Returns

Victoria's commercial security deposit rules differ significantly depending on whether the property is a retail premises (covered by the Retail Leases Act 2003) or a non-retail commercial property (governed by the lease agreement). Understanding these distinctions is essential for every commercial landlord.

Disclaimer: This guide provides general legal information for educational purposes only and does not constitute legal advice. Always consult a licensed legal practitioner in Victoria for guidance specific to your situation. Information last verified: March 2026.

Retail vs. Non-Retail Deposits

Retail Premises — Deposit Rules

Under Section 24 of the Retail Leases Act 2003:

Holding the Deposit

• The landlord must hold the deposit in an interest-bearing account on behalf of the tenant
• The landlord must account to the tenant for any interest earned
• Interest is treated as part of the security deposit
• Unlike residential bonds, there is no central authority (like the RTBA) that holds commercial deposits

Amount

• There is no prescribed minimum or maximum amount
• The deposit amount is subject to negotiation between landlord and tenant
• Common practice: 1-3 months' gross rent (including outgoings)

Return of Deposit

If the tenant has fulfilled all lease obligations:

• The landlord must return the deposit within 30 days of the lease ending
• Interest accrued must be returned with the deposit
• Deductions can be made for rental arrears or breach of lease obligations

Disputes

Disputes over retail security deposits can be referred to the Victorian Small Business Commission (VSBC) for mediation, then to VCAT if unresolved.

Non-Retail Commercial — Deposit Rules

For non-retail commercial properties (offices, warehouses, industrial):

• No statutory requirements — the lease agreement governs all deposit terms
• Amount, holding arrangements, interest, and return conditions are fully negotiable
• Landlords are not required to hold deposits in a separate or interest-bearing account
• Return timelines and deduction conditions must be specified in the lease

Bank Guarantees

Many Victorian commercial leases use bank guarantees as an alternative to cash deposits:

How They Work

• A bank issues a guarantee to the landlord for a specified amount
• If the tenant defaults, the landlord can draw on the guarantee
• The tenant pays the bank a fee to maintain the guarantee

Advantages

Key Provisions to Include

• Amount — typically equivalent to the cash deposit
• Expiry date — should extend beyond the lease term
• Claim conditions — circumstances under which the landlord can draw on the guarantee
• Renewal provisions — automatic renewal or replacement before expiry
• Return — when and how the guarantee is returned after the lease ends

Allowable Deductions

Landlords may typically deduct from the security deposit for:

• Rental arrears — unpaid rent and outgoings
• Breach of lease — costs arising from tenant default
• Make good — costs to restore the premises to the required condition
• Damage — repair costs beyond fair wear and tear

Best Practices for Commercial Landlords

1. Document deposit terms clearly — Specify amount, interest, return timeline, and deduction conditions in the lease
2. Use interest-bearing accounts for retail — This is legally required
3. Consider bank guarantees — Often preferred for larger commercial tenancies
4. Process returns promptly — Within 30 days for retail; per lease terms for non-retail
5. Conduct thorough inspections — At lease start and end to support any deductions
6. Keep detailed records — Receipts, invoices, and correspondence related to any deductions

How Landager Helps

Landager tracks commercial security deposits, bank guarantee expiry dates, and lease-specific return requirements — ensuring you manage deposits efficiently and in compliance with Victorian law.

Back to Victoria Commercial Property Laws Overview.