While the security deposit might seem like a small part of rental management, it is indeed significant. Being a property owner in Apex means you must be aware of the rules regarding tenant security deposits. Security deposits, unlike rental payments, do not count as part of your investment income. There are particular rules you need to follow when handling security deposits, including accepting, depositing, and reimbursing them.
Understanding these rules helps you decide the appropriate amount to charge and how you can legally use the security deposit after the tenant leaves. We will go over the basics of security deposits in this article, providing you with the knowledge to handle them efficiently from start to finish.
How much should you charge for a security deposit?
Determining the security deposit amount is one of the key decisions for property owners before listing a rental. Since there might be limits on security deposits based on location, ensure you check state and local laws before deciding.
The standard security deposit amount is usually the same as one month’s rent, plus any cleaning or pet deposits. Look into what other local landlords charge for security deposits to keep your rates competitive. A high security deposit request may discourage potential tenants.
Ethically handle security deposit funds
After receiving the security deposit, it’s important to know your state’s rules regarding where to store the funds. Some states require the security deposit to be held in a separate, interest-bearing account, while others offer various alternatives.
Irrespective of local regulations, proper property management includes carefully recording where the deposit is kept and not using it without legal grounds.
Stay responsible with tenant security deposits
Landlords can keep and use a tenant’s security deposit in particular situations. The most typical reason is to cover the cost of repairs for damages beyond normal wear and tear. This may involve repairing a broken appliance, addressing significant wall damage, or dealing with excessively stained carpet.
However, it’s crucial to understand that using security deposit funds for projects unrelated to tenant-caused damage beyond normal wear and tear is illegal. Adhering to these legal and ethical rules makes you a fair and responsible landlord.
Other valid reasons to keep a tenant’s security deposit are cleaning costs, unpaid bills, and in certain cases, a broken lease or nonpayment of rent. However, some states prohibit landlords from using security deposit funds for unpaid fines or late fees, so be sure to check your local regulations.
Refund security deposits to tenants
Once the tenant leaves, you have to decide on the amount of their security deposit to be returned. When lease terms are completely met, it is the landlord’s duty to return the full refundable security deposit. In several states, the refund must be processed within a specific timeframe, commonly within 30 days or less. Should you withhold any security deposit funds, an itemized list of the repairs paid for is essential.
Clearly communicating any withheld funds to your tenant, even if not required by your state, is a best practice to avoid misunderstandings or legal problems. If the security deposit return or itemized bill for deductions is delayed, the property owner may be penalized up to three times the deposit amount.
The complexities of security deposit issues can often exceed initial expectations. In Apex, rental property owners trust the experts at Real Property Management Excellence. Our local experts are well-versed in your state’s laws and can assist with managing security deposits, rent, and other tenant interactions ethically and legally. Contact us online or call 919-827-1107 today!
Originally Published on June 18, 2021
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