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My understanding is that the default / customary approach to leasehold improvements is that they go to the lesser at the end of the lease. When that's the case, how is the condition of the improvement(s) evaluated when it comes to returning a security deposit?

For example, say I lease a space in which I put up a couple of partitions in the corner to create a room. The lesser agreed to and approved the improvements when they were completed. So there is no conflict as to the initial improvement itself. However, when the lease expires, the lesser attempts to hold back a portion of the deposit for repairs to the drywall on the partitions. The damages were minor from hanging equipment on them - they did not materially decrease the utility of the wall itself.

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If you really wanted to dispute it, it would be up to a court. Normally, you look at whether there is "normal wear and tear" or damage. https://www.thebalancesmb.com/keep-a-tenants-security-deposit-2124998

I don't know how much was done to your walls in your case, but if you damaged them beyond normal use you will probably have to pay. It is reasonable to pay for the repairs if it really needs it.

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