A security deposit is required by most landlords when renting their property, whether it is a house or an apartment. This security deposit is designed to ensure that the new tenant abides by the rental agreement: paying the rent and for any excessive damage to the property. The laws regarding security deposits vary from state to state.
Many tenants believe that a security deposit and last month’s rent are the same thing. This is not the case. The security deposit provides the funds for repairs to the landlord after the tenant moves out, while last month’s rent secures the individual’s last rent payment for the security of the landlord at the end of a rental agreement. Many landlords may require that both be paid upfront when the rental agreement is made.
The landlord should provide the tenant with a receipt for each prepayment made by the tenant. In many states, the law requires that the landlord provide a receipt. The following should be included on each prepayment receipt:
- How much the tenant paid
- The date the tenant paid
- The name of the person who received the payment
- If an agent is used, the name of the landlord for whom the payment was collected
- The signature of the agent or landlord
If the landlord requires prepayment of the last month’s rent, the landlord should provide a statement as to whether the tenant is entitled to interest. The tenant should also provide the landlord a forwarding address where the deposit and interest should be sent at the termination of the rental agreement. In some states, the landlord may be required to pay the tenant interest on both the security deposit and the last month’s rent.
When paying a security deposit, the tenant should require a statement of condition for the property. This should be a comprehensive list of existing damages on the rental property. In some states, this statement is required. The statement should list all of the existing damages. It is in the tenant’s best interests to photograph any existing damages, as well as the general condition of the property.
The landlord must return the security deposit within a specific time period, usually thirty days, after the tenancy has been terminated. The landlord may deduct any unpaid rent as well as the amount required for repairs. The tenant is responsible for maintaining the property and keeping it clean, sanitary and free of trash. The tenant does not have to pay for normal wear and tear on the property.
If the property is damaged, the landlord should provide the following to the tenant:
- A detailed list of the damage to the property and the repairs required to fix these damages.
- Written estimates, bills, invoices, and receipts for the actual cost or estimated costs to fix those damages.
The landlord is required to return the balance of a security deposit, if any, after the damages have been repaired and all other deductions are made. If the landlord does not return the deposit to the tenant with the accrued interest within a specific amount of time after the termination of the tenancy, or does not provide the tenant with the list of damages, the tenant may be entitled to sue the landlord depending on the state law.
Typically, the state courts will have special procedures to simplify resolution of disputes over security deposits such as small claims court, mediation or a dedicated landlord/tenant court.