As a landlord, one of your most important responsibilities is to protect your investment property and ensure that it remains in good condition for future tenants. 

One way to do this is by requiring a security deposit from each tenant before they move in. A security deposit is a sum of money that is collected upfront and held by the landlord as a guarantee against any damages, unpaid rent, or other expenses that may occur during the tenancy. 

Here’s what you need to know about security deposits.

What is a Security Deposit?

A security deposit is a sum of money that is collected by the landlord at the beginning of a lease term and held in a separate account for the duration of the lease. 

This deposit is intended to cover any damage that the tenant might cause to the property or to pay for unpaid rent or utilities. 

In most states, landlords are required to return the security deposit to the tenant at the end of the lease term, provided that there is no damage to the property and all rent and other charges have been paid.

How much can you charge?

The amount that a landlord can charge for a security deposit varies from state to state and can also be affected by local ordinances or landlord-tenant laws. 

Generally, landlords can charge up to one or two months’ rent as a security deposit, depending on the state. Some states may also have a cap on the amount of the deposit that can be charged for unfurnished units versus furnished units. 

It’s important to check the local laws and regulations before setting a security deposit amount.

So, how should you handle security deposits?

Landlords should always handle security deposits carefully and in accordance with local and state laws. Here are a few tips to help you manage security deposits effectively:

  1. Keep the deposit in a separate account: Landlords should always keep the security deposit in a separate account from their personal funds. This helps to ensure that the funds are available if they are needed to cover any damages or other expenses.
  2. Conduct a move-in inspection: Before a tenant moves in, landlords should conduct a move-in inspection of the property to document its condition. This inspection should be done in the presence of the tenant and should be documented with photos and written notes.
  3. Provide a written lease agreement: A written lease agreement should be provided to the tenant, outlining the terms of the lease, including the security deposit amount, any pet deposits or fees, and any other fees or charges that may be assessed.
  4. Conduct a move-out inspection: At the end of the lease term, landlords should conduct a move-out inspection of the property to document any damages or issues that need to be addressed. This inspection should also be done in the presence of the tenant and documented with photos and written notes.
  5. Return the deposit promptly: Once the move-out inspection has been completed, landlords should return the security deposit to the tenant promptly, within the time frame specified by local and state laws.

Wrapping up

Collecting a security deposit is an important part of the landlord-tenant relationship. It helps to protect the landlord’s investment in the property and provides a guarantee against any damages or unpaid rent that may occur during the tenancy.

By following local and state laws and guidelines, landlords can effectively manage security deposits and ensure a positive and productive tenancy for all parties involved.