Security Deposits For Rental Properties

Every landlord charges a security deposit from tenants of his / her rental property, in order to protect it, if a tenant fails to adhere to the lease agreement. Used, usually, to cover any damages caused by a tenant to the landlord’s property, such as, broken doors or windows, paying for the cleaning and for junk removal after a tenant has vacated security deposits are used for such, or any other destruction to the property. As well, it can be used if a tenant walks out without giving the landlord 30-days notice or without paying his / her last month’s rent.

However, most landlords have not familiarised themselves as to the legal handling of security deposits, or even how much should be charged. A number of laws govern security deposits, including whether interest is to be accrued for the period the security deposit is held by the landlord. If a landlord does not wish to walk on the wrong side of the law, it is important he / she brushes up on local, state and federal laws surrounding security deposits, so as to avoid legal hassles.

A landlord’s first task is to determine the amount to be charged for them. It should be enough to cover any damage to his / her rental property, at the same time it should not exceed the limits set by state law. There are certain states that do not allow more than one-and-a-half month’s rent to be charged as security deposit. If as a landlord, you feel this amount may not cover potential damages, it is a good idea to insert a clause in the lease agreement that states the tenant will be held liable should excess damages occur.

Once the amount to be charged as security deposit has been decided, it should be incorporated in the written lease agreement, including a separate clause, stating it will cover tenant damages to the property beyond normal wear and tear, as well as, should a tenant elect to terminate the rental lease before its due date. This ensures tenants are well informed as to what is expected of them to get back a full refund of their security deposit.

At the same time, landlords should bear in mind security deposits are not to be confused with pet deposits. The latter are non-refundable and are used for cleaning or repair of damages caused by a pet. Any rental property allowing pets will also charge a pet deposit, a difference that should be specified in the rental agreement to reduce confusion and keep a tenant informed, as to what will occur when the lease ends.

Landlords should also be aware, if the security deposit is not used while the lease is in effect, it does not have to be claimed as income on tax returns.

On the whole, it is quite possible a landlord may avoid any tenant trashing of his / her property due to careful tenant screening and background checks. (Visit www.e-renter.com for tenant screening and background check services). Even so, a security deposit provides peace of mind, in case a problem tenant causes more damage than the deposit covers. At least, security deposits help a landlord in repairing some of the damage caused by rampaging tenants!