When Your Tenant Wishes to Use Security Deposit As Rent

Not an unusual situation, many tenants faced with a financial crunch will often ask their landlord to use the security deposit as rent for the month. Some may even feel that if they are short of funds and in any case are moving out, the landlord will just have to use their security deposit for rent.

No doubt, this catches many landlords off guard and leaves them absolutely flabbergasted. Well, if you are in the rental property business, you should be aware that this is a common excuse tenants come up with to avoid paying rent, and you should be prepared for situations, such as this one.

One way to avoid this type of situation is to go over the lease carefully with prospective tenants at the lease signing. Read the security deposit clause with them carefully, explaining why the security deposit cannot be used in lieu of rent. Stress on and make the following points clear to the tenants:

1. Security will be kept in a special escrow account for the entire lease or tenancy term.
2. Security deposits cannot be used by landlords for any reason other than physical or financial damage resulting from the tenant’s failure to comply with the rental lease signed by them.
3. Inform them failure to pay rent will result in eviction which in turn will have an adverse effect on the tenant’s credit rating.
4. Make it clear, any delinquencies in rent payment will be reported to credit bureaus.
5. Go over the security deposit clause which clearly states that it is not to be used as rent, and if the tenant intends to do so, they will be breaching the contract, which could lead to legal action.
6. Lastly, in the event of defaulting on rent payment, remind tenants of the consequences of such an action, made abundantly clear in their rental lease i.e. the tenant will have to pay a late fee, in addition to rent collection costs, and lawyer fees if taken to court, along with a bad credit report.

This may or may not help to get your tenant to toe the line, but a warning letter from your lawyer will soon have them paying up. As a landlord, you will find tenants have a lot of tricks up their sleeve trying to hoodwink you, but as long as you have a water-tight lease, you can get them each time. The lease is the most important clue to being a successful landlord; the rest can more or less be dealt with, if your rental lease covers every tenant eventuality.