A damage deposit is a sum of money paid by the Subtenant to the Sublandlord to guarantee that the Subtenant will not damage the property. The Sublandlord holds the damage deposit for the term of the Sublease Agreement to ensure that the Subtenant does not default on the terms of the Sublease Agreement or otherwise damage the property.
Should the Subtenant damage the property (normal "wear and tear" excluded), the Sublandlord is entitled to recover the debt from the damage deposit. Usually the Subtenant must provide the Sublandlord with the damage deposit at the start of the Sublease Agreement. At the end of the Sublease Agreement term, the Subtenant will receive the deposit back minus any deductions for repairs/restoration.