Security deposits are an important part of life as a renter. Whether renting a house or an apartment, understanding what security deposits are for and how they work can be tricky. However, renters need to know not only the purpose behind their security deposits but also how to protect them.
We put together a guide to walk you through everything renters—both new and experienced—need to know about security deposits, mainly:
- What is a security deposit? A security deposit protects the landlord and can cover unpaid bills, repairs, or issues that would prevent renting to a new tenant.
- What happens to the security deposit at the end of the lease? Security deposits are usually refunded when the property is in good condition, accounting for everyday wear and tear.
- How can renters protect their security deposit? Always get a receipt for the security deposit, give proper notice, repair damages, pay bills, and clean the unit.
How Do Security Deposits Work?
A security deposit is essentially designed to protect the landlord’s property. Once the lease terminates, it can be used to cover any potential unpaid bills, repair damages caused by the tenant, or take care of various other issues that may hinder the rental to a new tenant.
Before the lease can begin, the tenant must pay the security deposit to the landlord or property management company. After that, the security deposit is kept in a secure account for the duration of the lease.
Security deposit laws and regulations vary across the country. Usually, state laws set the rules for handling security deposits, ensuring landlords and tenants are protected. These laws cover things like how much a landlord can charge, what the deposit can be used for, where it should be kept, and how quickly it must be returned.
Security Deposit Limitations
Security deposit limitations vary, but many states stipulate that the security deposit cannot exceed one month’s rent. However, this cap can be higher, with some places allowing the security deposit to be as much as two month’s rent or more.
Higher security deposits may be implemented in certain circumstances. For example, if a potential renter has a risky rental background, such as a poor credit score, the landlord may have the right to offset the potential risk by requesting a higher security deposit.
For the most part, tenants need to research their local security laws. Not only will this enable them to budget accurately, but it will also let them know their rights.
What Happens to the Security Deposit at the End of the Lease?
At the end of the lease, the landlord must return the security deposit to the tenant, typically within two to three weeks. However, it’s not a given that the tenant will receive the full amount back.
Simply put: landlords can make deductions as they see fit, within reason. If this is the case, the tenant will typically be issued a list of expenses and other applicable deductions. Then, the remaining deposit will be returned to them.
The most common security depository deductions are:
1. Significant Damage to the Property
If the tenant causes any damage to the property, the landlord has the right to use the security deposit to pay for the repairs. This is the number one cause for tenants to lose a chunk of their deposit, but it’s well worth knowing the difference between normal wear and tear and tenant-caused damage.
Tenants shouldn’t be charged for the following wear and tear and can generally argue against:
- Minor scratches to countertops, floors, and other woodwork
- Minor stains and scuffs on carpets
- Loose cabinet or door handles
Meanwhile, the most common, more significant damage caused by the tenant would be deductible, such as:
- Burn marks or major scratches and dents in woodwork, countertops, and floors
- Large stains or major tears to carpets
- Large holes in the walls or ceilings
- Smashed windows
- Faulty doors, windows, cabinets, and light fixtures
2. Missed Rent Payments
If there are any rent payments outstanding by the end of the lease, the landlord can use the security deposit to pay for them. Be advised that renters are expected to pay the rent for the last month rather than relying on the security deposit to cover it.
3. Missed Utility Payments
The security deposit can also be used to pay any outstanding utility bills from the lease period. Tenants need to check their lease agreement to determine which utilities they must pay and which, if any, the landlord is responsible for.
4. Early Termination of the Lease
Breaking the lease early can result in penalties for the tenant. Such penalties will generally be taken from the security deposit. The lease agreement should detail all the terms and clauses regarding the early termination of the lease by the tenant.
5. Major Cleaning Costs
It’s normal for the landlord to carry out a deep clean between tenants. But, expect deductions if things like excessive mold, pet hairs on upholstery, or leftover garbage in the unit need to be taken care of.
6. Leftover Belongings
Tenants who leave things behind for the landlord to dispose of can typically expect a deduction from their security deposit.
How To Protect Your Security Deposit
Knowing the main reasons for deductions can go a long way to protecting a security deposit. However, other things need to be done, too. For example, tenants are advised to get a receipt when they make the security deposit payment.
With this receipt, renters are protected in case of future issues with the security deposit. It provides a written record of the transaction and should include the following information:
- Date of payment
- Amount paid
- Reference, detailing that it is a security deposit payment
- The names of the tenant, landlord, and or property management company
- The signature of the landlord or property manager
Other ways to ensure a full return of the security deposit include:
- Giving plenty of notice when moving out—typically at least 30 days but check the lease agreement for the specifics
- Repairing any damage caused during the lease period
- Paying all the bills before the lease ends
- Giving the unit a deep clean before leaving
- Knowing the ins and outs of the lease agreement and understanding tenant rights and responsibilities
For the most part, simply taking good care of the unit throughout the lease will protect most tenants from security deposit deductions. Make sure to take care when moving heavy items in the unit, and never drag heavy furniture across the floor, especially if it’s wooden or laminate. If any damage is caused, have it repaired in good time.
How to Dispute an Unfair Deduction
Sometimes, the landlord may make deductions or unfairly withhold the security deposit. In this case, tenants can take steps to have their deposit returned.
First and foremost, tenants should be certain that they gave adequate notice, paid all the bills, left no damage, and left the unit clean. If possible, these measures should be documented, so before leaving, it’s a good idea to take photo evidence of the unit’s state.
Be sure to record all rent and utility payments and give a written lease termination notice. With all this in place, tenants can contact the landlord and query the deductions, offering the evidence gathered. Hopefully, an agreement can be made, which should be recorded in writing.
If no agreement is reached, a formal demand letter should be drawn up, complete with the evidence that supports the claim that money is owed. This can also help to cite local security deposit laws here. The letter should let the landlord know that the tenant knows their rights and will hopefully encourage them to return the deposit. If the letter is unsuccessful, the next course of action is to file a lawsuit against the landlord.
In most cases, tenants can protect their security deposit by ensuring they understand local regulations and have read through their lease agreement thoroughly. To keep their security deposit safe, it often boils down to renters staying on top of the basics—knowing their rights, taking care of the place, and following the lease rules.
Image credits: fizkes; Mironov Konstantin; maybealice; Yellow_man/Shutterstock.com
