If you own or manage a rental property, this review will help you understand your security deposit rights and duties.
What you will discover:
What exactly is a security deposit?
What is the maximum amount I may request as a security deposit?
What are the pet deposit regulations?
How should security deposit money be kept?
What kind of expenses might a landlord deduct from a security deposit?
What happens if a landlord does not promptly refund the security deposit?
Make certain that your security deposits are both legal and effective.
When renters leave, repairs and rigorous cleaning that go beyond normal wear and tear may be required. A landlord or property management may wish to collect a security deposit before the start of the tenant’s lease term to minimise the chance of having to pay for this—and to create an incentive for renters to be responsible. This deposit may also be taken if a renter breaches the contract or owes unpaid rent after moving out. If you own or manage a rental property, the following summary will help you understand your security deposit rights and duties.
Table of Contents
What exactly is a security deposit?
A security deposit is money given by a tenant to be retained by a landlord or property management in the event that funds are required to repair damaged property or pay missed rent after the tenant moves out. It is often collected at or before the lease signing. State legislation typically limits the amount of this deposit.
Landlords must educate themselves on the statutory rules and best practices for processing security deposits since they are refundable, less reasonable deductions. You must also maintain meticulous records in order to be well-prepared in the case of a disagreement. Some jurisdictions even require you to give a Security Deposit Receipt, so if you have any issues regarding the rules that apply to your rental property, consult with a lawyer.
What is the maximum amount I may request as a security deposit?
In most jurisdictions, the amount you may ask for a security deposit is set by law, and typically varies from one to three months’ rent depending on where the property is situated. In New York, for example, a security deposit is restricted to one month’s rent. Senior folks may also be eligible for reduced security deposit restrictions in several states.
There are 21 states where there is no statutory security deposit restriction. As a consequence, a deposit within the normal range for your rental market may be most appealing to potential renters. Inquire with a lawyer if you have any issues concerning security deposits for your property.
What are the pet deposit regulations?
The requirements concerning pet deposits differ from state to state. Some states demand that any extra pet deposit be within the normal security deposit restrictions. However, in other places, such as New York, landlords are not allowed to charge more than one month’s rent as a security deposit, which eliminates charges if a renter owns a pet.
In general, you have the authority as a landlord to refuse rental applications who have pets; but, you may not discriminate against or charge a pet deposit (or pet rent) to owners of service animals. If you do allow pets, you should be aware of the laws in your state. Consult a lawyer for the most recent recommendations.
How should security deposit money be kept?
Security deposit policies differ by state or municipality, and in other circumstances, there are none. Depending on the location of the property, there may be restrictions on the sort of account in which the money may be held, whether or not you pay interest to the renter, and whether or not deposit monies must be maintained separate from rental revenue. Consult a lawyer for advice on the restrictions that apply to your property.
What kind of expenses might a landlord deduct from a security deposit?
After the tenant moves out, a landlord may normally deduct the following sorts of damages and other fees from the deposit:
Significant damage might include wall holes, big stains on the carpet or walls, fire marks, and damaged appliances, windows, or doors.
Cleaning charges: Because tenants are often responsible for cleaning the rental property to its pre-move in state, cleaning fees related with excess garbage or filth may usually be deducted from the deposit.
Unpaid bills or rent: The deposit may be used to cover the expense of any unpaid rent or bills, such as utilities, that the renter is liable for.
Broken lease: Depending on your state’s laws and the conditions of the lease, you may be permitted to retain part or all of the security deposit if the renter breaches the contract before the move-out date.
Whatever you decide to subtract from the deposit must be itemized and recorded clearly. Keep receipts for any repair or cleaning services and submit copies with the Security Deposit Return Letter or make them accessible upon request.
A final walkthrough with the tenant, as well as the completion of a Move Out Inspection Checklist, may be beneficial before the tenant departs the property, so that everyone is on the same page and agrees on any deductions.
What happens if a landlord does not promptly refund the security deposit?
Typically, states establish a time restriction for repaying the deposit. In New York, for example, landlords typically have 14 days. Landlords in Texas typically have 30 days. Landlords in California normally have 21 days. If you keep the deposit over the date or fail to refund what is owing to the renter, you may be obliged to pay interest or face a small claims court lawsuit. A landlord-tenant attorney may assist you in understanding the regulations for your property.
Make certain that your security deposits are both legal and effective.
Landlords are responsible for much more than just collecting rent payments. Make certain that you understand all relevant state laws, that you record everything, and that you follow best practices. Your rental company may run more smoothly if you do this. If you have any more legal issues concerning your rental property, consult with a lawyer.
