What is a Security Deposit?
Landlords often require tenants to pay a security deposit as part of their lease agreement before moving into an apartment. Depending on the transaction terms between the landlord and tenant, the security deposit can either be refundable or nonrefundable. Landlords collect these funds as a means of security, as well as to pay for future damages that might occur.
Security deposit: What is it?
A security deposit is a predetermined sum of money tenants pay to a landlord before moving into an apartment or rental property. These deposits are to ensure that tenants pay their rent and follow the rest of their responsibilities as the lease outlines. For example, landlords could use that deposit toward paying for damages the tenant caused. Every state has a separate statute regarding security deposit law.
How much does a typical security deposit cost?
Typically, a security deposit is equal to at least one month’s rent but can be up to three. So, when calculating how much money you need before move-in day, that is the number you must keep in mind. Often, the landlord asks for the first month’s rent and a security deposit before handing over the keys. Sometimes the landlord requires the last month’s rent, as well.
Factors that can affect how much your security deposit costs:
Several factors contribute to the cost of a security deposit, including state laws. For example, Chapter 710-A §6032 of Maine Landlord-Tenant Law describes that the security deposit cannot exceed two months’ rent. However, if you want to rent in the state of California, the guidelines are entirely different. California Code, Civil Code – CIV § 1950.5 states that landlords can charge the equivalent of up to two months’ rent for residential properties without furniture and the equivalent of up to three months’ worth of rent for furnished residences.
Additional factors that could affect how much your security deposit costs include:
- Amenities: If your apartment or rental property features many amenities, such as private parking and concierge services, your landlord might require a higher amount for the security deposit.
- Missing payments: While you cannot expressly state that you want to use some or all of your security deposit for rental payments, your landlord might use those funds if you get into the habit of not paying your rent.
- Pets: Laws in each state allow landlords to charge a pet deposit to cover any damages that might occur.
- Your credit score: Landlords access your credit report to determine what level of risk you pose as a potential renter.
When am I required to pay my security deposit?
Tenants must pay their security deposit before moving in, just like they would for their first month’s rent. Many states make the property manager or landlord responsible for furnishing a checklist of payments and other disclosures they require before the move-in date.
What do landlords do with security deposits?
Landlords collect security deposits to ensure their tenants pay their rent on time and keep the property in reasonably good condition. They put these funds into a separate bank account and hold it for specific purposes. Each state dictates how a landlord can use or deduct from a security deposit. For example, Alabama allows landlords to deduct rent owed and the cost of repairs from the security deposit. However, Wisconsin allows deductions, including the cost of repairs, rent owed, unpaid utilities, and unpaid monthly municipal fees.
Why would my landlord take money from my security deposit?
If there is no excessive damage or extra cleaning necessary, your landlord returns your security deposit in full. If there are damages, the time and energy necessary for those repairs prevent landlords from renting the property again quickly. Because each state has different landlord-tenant laws, what a landlord can deduct from your security deposit varies.
Examples of what your landlord can take from your security deposit include:
- Pest extermination
- Removing paint that the tenant put up
- Cost of repairing broken walls, doors, or other permanent fixtures
- Replacing or repairing appliances broken due to negligence
- Repairing or replacing damaged carpeting or other floor coverings
What doesn’t my security deposit cover?
There are several things that a security deposit does not cover, including the normal wear and tear on a rental property or unit. However, there are more significant issues a landlord might come across. For example, if a natural disaster strikes or other weather events cause damage, no portion of the security deposit is available for covering those repairs.
Fire damage also cannot be deducted from a security deposit. For example, if the fire was caused by faulty wiring that created a hazard, it is the landlord’s responsibility to pay for repairs. The same is true for flooding that results from old, broken, or otherwise non-functioning pipes or plumbing fixtures.
In the case of a theft, the security deposit does not offer coverage. Instead, the landlord and renter must have an insurance policy in place to recover damages from a break-in. For example, if you have a renter’s insurance policy, you can claim your lost items. Landlords or property managers use their insurance policy to cover repairs, like broken windows or locks, from that theft.
Will I get my security deposit back?
If you want to get your security deposit back, you must take some steps to ensure that happens. First, read your lease termination clause and be sure you are following it to get your security deposit back. After you know those guidelines, write a letter to your landlord outlining your plan to move. Make sure the letter includes your new address.
Landlords also expect their tenants to pay their last month’s rent, as well as keep up with the rest of rental payments, before returning a security deposit. Failure to make these payments gives the landlord the right to deduct it from your security deposit.
If the landlord or property manager finds damages beyond reasonable wear and tear or must do extensive cleaning, that could forfeit your right to receiving your security deposit. That means you must clean thoroughly before moving out and make sure to complete small repairs. Examples of such repairs include changing light bulbs, unclogging drains, and filling in picture hanging holes.
The bottom line
Make sure you research landlord-tenant laws for your area regarding regulations for charging, returning, or keeping security deposits. That way, you understand how a landlord or property manager can legally collect, use, and withhold these funds. Those laws also outline what a landlord can use funds for and the timeframe in which they must return them.