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Security Deposit Basics

A security deposit is a deposit of money to the landlord to ensure that rent will be paid and other responsibilities of the lease performed (e.g., paying for damage caused by the tenant). The laws surrounding these deposits vary from state to state; this is a general overview.

Security Deposit or Last Month's Rent

A security deposit and the last month's rent are not the same thing. Last month's rent is the pre-payment to the landlord for the last month of tenancy. The amount of the last month's rent and of the security deposit each are usually one month's rent, and in some states they can not be greater than one month's rent. If the landlord later raises the rent, he or she can require the tenant to increase both the amount of the last month's rent and the amount of the security deposit to equal the new rent. A landlord typically cannot transfer one for the use of the other without the tenant's consent. Likewise, the tenant may not use the security deposit as the last month's rent.

Security Deposits: Receipts and Interest

Upon receiving a last month's rent and/or a security deposit, the landlord should give the tenant a receipt for each prepayment. If he or she does not, it is appropriate for the tenant to ask for one. In many states, the landlord is required to give the tenant a receipt. The following information should be included in the receipt:

  1. the amount paid,

  2. the date on which payment was received,

  3. the intended use of the payment,

  4. the name of the person receiving it,

  5. if an agent is involved, the name of the landlord for whom the rent is collected, and

  6. the signature of the landlord or agent.

If the last month's rent is collected, the landlord should also give the tenant a statement indicating whether he or she is entitled to interest. The tenant should provide the landlord at the termination of tenancy with a forwarding address where the deposit and interest is to be sent.

IMPORTANT: THE LANDLORD MAY BE REQUIRED BY STATE LAW TO PAY INTEREST ON BOTH LAST MONTH'S RENT AND SECURITY DEPOSIT

If a landlord or agent takes a security deposit, it is in the tenant's interest to agree with the landlord on the present condition of the premises. In some states, a signed statement of condition is required. The statement should contain a comprehensive list of existing damages. It may also be wise to take notes, and to photograph existing damage and the general condition of the apartment.

Returning the Deposit and Deductions

The landlord must return the security deposit within a fixed time (typically thirty days) after the termination of tenancy. However, the landlord can usually deduct for any unpaid rent which has not been withheld validly or deducted under the law, and any reasonable amount necessary to repair any damage caused by the tenant. Pet damage can also be deducted. The tenant does not have to pay for reasonable wear and tear associated with normal use. However, the tenant is responsible for maintaining the apartment in a clean and sanitary condition, free of garbage and rubbish.

If the premises are damaged, the landlord must typically provide the following within thirty days after the tenancy ends:

  1. a detailed list of damages listing their nature and extent, and the repairs required to remedy them; and

  2. written evidence such as estimates, bills, invoices, or receipts, indicating the actual or estimated cost of these repairs.

The landlord must return the balance of the security deposit (if any) after all proper deductions have been made. If the landlord fails to return the security deposit (or balance after lawful deductions) with accrued interest within the prescribed time after termination of the tenancy, or fails to furnish the tenant with an itemized list of damages within that time if deductions are made for damages, the tenant may sue the landlord according to state law. Many states' statutes provide for damages in triple the amount of the security deposit withheld.

Typically, state courts make some provision for easy resolution of security deposit disputes, such as in small claims, conciliation, or landlord/tenant court. If you are involved in a dispute over a security deposit either as a landlord or as a tenant, call your local court to discover your options.

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