When tenants move out, repairs and extensive cleaning may be required that go beyond the usual wear and tear. To reduce the risk that the invoice will not be kept and to give tenants an incentive to take responsibility, it may be in your best interest as a landlord or property manager to pay a deposit at the beginning of your rental period. This deposit can also be useful if a tenant breaks the lease or if he owes an unpaid rent after moving out. If you own or manage a rental property, the following overview will help you understand your rights and obligations in relation to security deposits.
Sign securely with Rocket Sign ™
Get fast digital signatures with optional legal advice.
What is a deposit?
A security deposit, usually collected on or prior to the signing of the lease, is an amount of money paid by a tenant and held by a landlord or property manager if, after the tenant moves out, means to repair property damage or to cover unpaid rents are needed. The amount of this deposit is often limited by law.
Since security deposits are deducted minus reasonable deductions, you need to know the government requirements and best practices for handling these funds. You must also keep detailed records so that you are well prepared in the event of a dispute. Some states even require a security deposit. Therefore, contact a lawyer if you have any doubts about the laws applicable to your rental property.
How much is a deposit?
The amount you can request for a deposit is limited by law in most states and is between one and three months' rent depending on the location of the property. Some states also have lower security levels for seniors.
While there are 21 states with no deposit limits at all, you may find that a deposit amount within the range typical of your rental market is most attractive to potential tenants. If you have any questions about security deposits for your property, contact a lawyer.
What about pet deposits?
The rules for depositing pets vary by state. Some states require an additional pet deposit to be within the general security deposit limits. In general, as a landlord, it is your right to refuse petition applicants. However, you must not discriminate against owners of service animals or raise a pet deposit (or pent rent). If you allow pets, you want to understand the rules in your state. Speak to a lawyer to get the latest guidelines.
How should security funds be stored?
The guidelines vary by state or location, and in some cases there are no restrictions. Depending on the location of your property, there may be restrictions on the type of account the funds can be stored in, whether you have to pay interest to the tenant or not, and whether the deposits must be kept separate from the rental income. Ask a lawyer for information about the rules that apply to your property.
What can a landlord deduct from a deposit?
There is no legal boundary between normal wear and unexpected damage. However, after the tenant has moved out, you can usually deduct the following types of damage and other costs from the deposit:
- Significant damage – This can include holes in the wall, large stains on the carpet or walls, burn marks and damaged equipment, windows or doors
- Cleaning costs – Tenants are usually responsible for cleaning the rental unit to the state prior to moving, so the cleaning costs associated with excessive garbage or dirt can usually be deducted from the deposit
- Unpaid bills or rent – The deposit can cover the cost of unpaid rents or bills, e.g. B. for ancillary costs for which the tenant is responsible
- Broken lease – Depending on the applicable state laws and the terms of the rental agreement, you may be able to retain part or all of the deposit if the tenant breaks the rental agreement before the move date
Whatever you want to deduct from the deposit must be listed and documented in a transparent manner. You should also keep the receipts for repair or cleaning services and either provide copies along with the return letter for the deposit, or provide them upon request.
Before the tenant leaves the property, it can also be helpful to carry out a final exemplary procedure together and to complete a checklist for the move-out inspection so that everyone is on the same page about possible deductions.
What happens if a landlord does not refund the deposit on time?
Not all states have deadlines for returning the deposit, but those that are between 14 and 45 days. If you keep the deposit after the deadline or fail to pay back the amounts owed to the tenant, you may have to pay interest, or you may be sued in a small claims court. A landlord's attorney can help you understand the requirements for your property.
Make sure your security deposits are legal and effective
Landlords have a lot more to do than just sit back and deposit rent checks. If you understand applicable state laws, document everything, and follow best practices, your rental business should go fairly smoothly. If you have further legal questions about your rental property, contact a lawyer.
This article contains general legal information and no legal advice. Rocket Lawyer is not a law firm or a substitute for a lawyer or a law firm. The law is complex and changes frequently. For legal advice, please contact a lawyer.