Understanding these rules helps you decide the appropriate amount to charge and how you can legally use the security deposit after the tenant leaves. This article will cover the basics of security deposits, providing you with the knowledge to manage them effectively from beginning to end.
How Much Should You Charge for a Security Deposit?
Usually, the security deposit requested is about one month’s rent, along with a cleaning or pet deposit. To ensure your rates are competitive, check what other landlords in your area are charging for security deposits. Setting a high security deposit might scare away prospective tenants.
Ethical Handling of Security Deposit Funds
Once you receive the security deposit, it’s crucial to follow your state’s regulations on where to hold it. Some states require landlords to keep security deposits in interest-bearing accounts, while others offer more flexibility. Regardless of local laws, maintaining detailed records of the deposit’s location and ensuring the funds are not used without legal justification is essential.
Responsible Use of Security Deposits
Landlords can keep and use a tenant’s security deposit in particular situations. The most typical reason is to cover the cost of repairs for damages beyond normal wear and tear. Such cases include a broken appliance, considerable wall damage, or heavily stained carpet.
It’s important to remember that it is illegal to use security deposit funds for projects not related to tenant-caused damage beyond normal wear and tear. By understanding and adhering to these guidelines, you will be a fair and responsible landlord.
Other valid reasons to keep a tenant’s security deposit are cleaning costs, unpaid bills, and in certain cases, a broken lease or nonpayment of rent. However, some states prohibit landlords from using security deposit funds for unpaid fines or late fees, so be sure to check your local regulations.
Refunding Security Deposits to Tenants
After a tenant moves out, you must determine the amount of their security deposit to be refunded. If all lease terms are fulfilled, the landlord must return the full refundable security deposit to the tenant. This refund often needs to be issued within a set period in many states, usually 30 days or under. If you decide to withhold part of the security deposit, including an itemized list of repairs funded by the deposit is necessary.
Clearly communicating any withheld funds to your tenant, even if not required by your state, is a best practice to avoid misunderstandings or legal problems. Taking too long to return the security deposit or to provide an itemized bill for deductions can result in a penalty of up to three times the deposit amount.
Expert Help with Security Deposits
Handling security deposits can be more complex than it seems. If you have additional inquiries, please contact one of our expert residential property managers.
Originally Published on June 18, 2021
We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.
We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.
