How have courts interpreted "security" in commercial lease agreements?

Granberry v. Islay Investments (1984) 161 Cal.App.3d 382, 207 Cal.Rptr. 652 provides guidance for analysis of this issue in an analogous context. There, the court construed a statute ( 1950.5) regulating "security" in residential leases. The plaintiff tenants contended that an amount denominated as the first month's rent was in fact a disguised security, controlled by the statute. The court recognized the possibility that designation of the fee as rent was not necessarily controlling. "A security is what the statute says it is, but we exclude from that definition legitimate rent. The term 'legitimate rent' may appear a tautology, but it is important to distinguish 'legitimate' rent from what a landlord calls rent when he wishes to disguise a payment which is really a security." (Id. at p. 389, 207 Cal.Rptr. 652.) The court applied the rule of statutory construction " ' "which would defeat subterfuges, expediencies, or evasions employed to continue the mischief sought to be remedied by the statute or to defeat compliance with its terms, or any attempt to accomplish by indirection what the statute forbids." ' " (161 Cal.App.3d at p. 388, 207 Cal.Rptr. 652.)

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