What is deferred rent?

Deferred rent refers to rent payments that have been delayed or postponed to a future period. This can occur when a landlord and tenant agree to a temporary reduction or suspension of rent payments due to financial difficulties or other reasons. The deferred rent is typically added to future rent payments or paid back in installments over a specified period of time.

Deferred rent can also refer to lease agreements where the rent payments increase over time, meaning that the tenant pays lower rent at the beginning of the lease and higher rent towards the end. This allows tenants to defer a portion of the rent to later years when the business is expected to be more profitable.

From an accounting perspective, deferred rent is recorded as a liability on the balance sheet and recognized as income over the period in which it is earned. It is important for landlords and tenants to clearly document any agreements related to deferred rent to avoid misunderstandings or disputes in the future.