When a lessee deposits with his lessor a sum of money under an agreement that the lessor will return it or apply it in a specified manner if the lessee fully performs his covenants, at least three legal problems may arise. First, in the event that the tenant fails to give full performance, how much of the deposit can the landlord keep? Second, is the obligation of the landlord to return or otherwise apply the deposit a covenant running with the land? Third, when does the landlord pay taxes on the deposit?
John T. Piper,
Lease Deposits in Washington,
30 Wash. L. Rev. & St. B.J.
Available at: https://digitalcommons.law.uw.edu/wlr/vol30/iss3/14