Securing The Security Deposit

Landlord - 'What am I legally allowed to subtract from a tenant's security deposit?' Tenant - 'How can I be sure to get my whole security deposit back from my landlord?'

What is a Security Deposit?

A security deposit is money that a tenant gives to a landlord, granting the landlord a reasonable degree of financial security should the tenant not meet his/her legal obligations as spelled out in the rental agreement. It is a 'deposit' that the tenant expects to get returned, unless they have acted outside their contractual obligations.

What Should a Tenant Know re: Security Deposits

  • Begin With the Laws of Your State. Your experience as a tenant in one city should not be your expectation in a different city, in another state. Know the laws in your state. The same is true regarding rental agreements. They are not the same from place to place. Read them carefully.
  • How Much Can a Landlord Require for a Security Deposit? Unfortunately, there isn't much consistency from state to state regarding this.  For example, Texas and Tennessee permit landlords to charge whatever they want for a security deposit. North Carolina places a limit equivalent to two months rent, while Massachusetts caps it at one month. Also, the amount may differ depending on the length of your tenancy. Again, know the laws in your state.
  • The Before and After Inspection. Make sure you and your landlord are in agreement on the initial condition of the rental unit. Take pictures. Write out the specifics on the inspection report. Get the landlords signature that confirms that what you saw and what they see is the same. If permissible, try to be there during the exit inspection as well. After you have moved out and cleaned the rental, take pictures even before the landlord inspects it. Here's a hint, if a landlord is not very particular about an inspection, s/he will probably not be very particular about your needs as a tenant.
  • Read the 'fine print' in Your Rental Agreement. What does the rental agreement say regarding the return of your deposit? How detailed is it? If the requirements for cleanliness are too broadly stated the landlord will have too much room to be persnickety on the exit inspection. Make sure that your idea of 'clean' is within the ball park of your landlords notion of 'clean' and get the details in writing. Also, know the difference between 'normal wear and tear' and property destruction. What is the landlord's requirement regarding nail holes in the walls, marks on the walls, dusting, cleaning the oven, etc. What if you have to break your lease early? Does the rental agreement require you to give written advance notice to your landlord stating when you plan to vacate the property? If you haven't, in some states the landlord will not be required to return your security deposit.
  • Don't Forget to... You won't receive your security deposit back if your landlord was not given your new address. Nor will you receive your deposit if you forgot to return the keys, any garage door and awning remotes, or anything else that belongs in the rental unit. All that came with the property should remain at the property.
  • If you believe that your landlord or property management company has wrongly withheld part or all of your security deposit you should, in writing, make clear your objections and objectives. Attempt to remedy the problem without going to court, but don't hesitate to sue a landlord if need be. Be sure to know the state laws that govern lawsuits.

What Should a Landlord Know re: Security Deposits?

Know the Laws. It doesn't matter what you've always done before, what you've done in other states, or what you think seems fair and reasonable. Follow the laws in your state and city re: security deposits. It is to your long range benefit that when a tenant leaves they will be your best advertisement rather than your worst nightmare. Get the facts for your state.

  • How much can you collect as a security deposit?
  • Have you made a difference between a security deposit and a pet deposit or other 'fees'?
  • Are you requiring the exact same security deposit from all tenants regardless of their gender, race, ethnicity, religion, number of children, disability, or sexual preference?
  • Are you required by law to give a written notice to the tenant after receiving the security deposit?
  • Must all security deposits be placed in a separate bank account?
  • Does the law require you to pay interest on the security deposit?
  • What deductions from the security deposit does your state permit you to make?
  • How quickly are you required to return the deposit after a tenant leaves?
  • If you are planning to make a legitimate deduction(s) from the security deposit are you required to first inform the tenant?
  • Are you required to send the tenant a 'move-out' letter that spells out your expectations, when you will be inspecting the unit, a reminder on what the legitimate deductions from a security deposit may be, and how you will refund their deposit?
  • Are you required to give an itemized statement re: all deductions?
  • Can the security deposit be used to cover the rent for the last month even if the tenants requests that you do so?
  • What can or should you report to the credit company re: necessary deductions made from a security deposit?

What Are Common, Legitimate Deductions from a Security Deposit?

Typically, deductions can be legitimately made from a security deposit if:

  • The tenant has left you with unpaid utility bills
  • Didn't pay rent
  • Has clearly damaged the property beyond reasonable wear and tear
  • The tenants didn't adequately clean the unit when they left

Look for the legal guidelines that speak about security deposits for each state. Realize, though, that these laws do change. Be sure to look for the most recent laws and check back regularly for updates.