As a renter, handing over money to a landlord to hold for the duration of your lease agreement may be a tough pill to swallow. You can, however, understand the necessity.
As a landlord, collecting a security deposit is vital if your tenant doesn't hold up his end of the bargain.
Security deposits exist to protect you, your renters, and your assets. Keep reading for sage advice on how they work and why it's necessary to include them in your rental agreement.
What Is a Security Deposit?
A security deposit is a sum of money, stipulated by the landlord, that a renter pays to cover potential lease violations.
Lease violations covered include things like damage to the property, unpaid rent, or breaking the lease.
This is an amount of money separate from an advance of monthly rent.
What Is the Purpose of Security Deposits?
Property managers and landlords collect security deposits to cover unforeseen costs. Tenant screening goes a long way in finding good tenants, but you may still end up with issues.
Collecting a security deposit gives renters an incentive to take good care of your property. It also encourages them to pay their monthly rent. If they hold up the terms of the lease, they will get the deposit back when the lease expires if they choose not to renew.
How Much Are Security Deposits?
In most states, there are laws pertaining to how much a landlord can legally charge for a security deposit. A security deposit can range from one to three months of rent.
Security Deposit Laws
29 states have statutory security deposit limits. Landlords in states without security deposit limits charge a deposit in the typical range for each particular rental market.
Examples of state laws include New York and Massachusetts' one-month rent limit. In Nevada, it's legal to charge up to three months' rent and New Jersey has a limit of one and a half months' rent.
Florida and Texas do not stipulate a maximum amount.
As a landlord, it's a good idea to consult a lawyer or property management company if you have questions about security deposits.
What's Included on a Security Deposit Deductions List?
In cases where a tenant has damaged the property, the money collected for the security deposit will cover the cost of repairs.
Common problems that security deposits cover include the following:
- Abnormal wear and tear on the property
- Unpaid rent
- Unpaid utility bills
- Abnormal cleaning costs
Landlords are expected to clean the property after a tenant moves out and prepare it for the next tenant. When a tenant leaves the property a mess or with a lot of damage, the landlord will keep some or all of the deposit to pay for repairs and cleaning.
Property Management Team of Tampa Bay
Now that you know the ins and outs of security deposits on rental properties, it's time to hand that responsibility over to the pros.
PMI Tampa Bay is a full-service real estate asset management company. Let our team of professionals provide you with the highest quality property management services.
Contact us today to set up a consultation through our website or by calling 352.200.2347.