In business, the buyer, the new tenant, is required to deposit a deposit, (Bond), or bank guarantee (Bank Guarantee), as a mortgage, to the landlord before the new lease comes into effect. If the buyer fails to pay the lease on time in the course of his business, the landlord will cash the deposit or bank guarantee as compensation.
Buyers and landlords need to know the difference between deposits and bank guarantee.
Bank guarantee is usually unconditional, is the bank's promise to the beneficiary (the beneficiary in this case refers to the landlord), when a particular event occurs, if the tenant fails to pay the rent on time, the landlord can ask the bank to fulfil the promise unconditionally. The bank cashed the amount promised on the bank's guarantee to the landlord without notifying the tenant.
And the deposit, in essence, is the trust money, is conditional. For example, the deposit is usually placed in a third-party credit account, such as the NSW Fair Trading Commission credit account, and if the tenant fails to pay the rent under the lease, the landlord can ask the FTC for a deposit. However, the Fair Trading Committee must notify the tenant and seek authorization. If the tenant denies breach of contract, the Fair Trading Commission shall not be cashed in to the landlord. In such cases, a third party's judgment is required if the landlord wants to cash the deposit.
Another important feature of the trust money is that landlords may not receive the deposit if the tenant fails to pay the rent on schedule if the tenant goes bankrupt during the operation. The deposit needs to be handed over to the tenant's clearing company, which allocates the tenant's remaining assets in accordance with the priority of the creditor, rather than giving the deposit directly to the landlord. Bank guarantee is otherwise, the landlord will not be affected by the tenant's bankruptcy, the bank must unconditionally deliver on its promise to the beneficiary, so the bank guarantee can guarantee the landlord's interests.
To sum up, bank guarantee and deposits are safer for landlords than bank guarantee. The difference between deposits and bank guarantee also applies to other business transactions.