Security Deposits FAQ
Q : Are deposits for cleaning, pets, parking, or garage door openers considered security deposits and, thus, refundable?
A : Yes. If the tenant performs the duties set forth in the lease, the landlord does not have a legal reason to keep the money whether the lease calls it a security deposit or not.
Q : Must landlords hold security deposits in a separate bank account apart from other assets?
A : Not unless the law imposes such a requirement. But if there is such a requirement, a landlord who fails to keep the security deposit separate from other money may owe damages to the tenant.
Sidebar: Interest on Deposits
Most states have statutes requiring the landlord to pay interest on the security deposit. In those states, the landlord cannot avoid paying interest simply because a lease says the deposit does not earn interest.
Some landlords try to get around this by calling the security deposit "prepaid rent." But some laws say prepaid rent earns interest as well.
After the passage of the local landlord-tenant ordinance in Chicago requiring the payment of interest on security deposits, a number of landlords converted the deposits to prepaid rent for the last month of the lease. So the City Council amended the ordinance to require the payment of interest on prepaid rent.
Q : Under what conditions does the landlord owe a refund of the security deposit?
A : The landlord will owe the tenant at least a partial refund if the rent was paid in full and the cost of repairs beyond normal wear and tear.
Q : What does the lease say about security deposits?
A : A preprinted standard lease form will probably contain a paragraph explaining that the tenant has made the deposit to assure compliance with all the terms of the lease. The lease will also set forth the conditions under which the landlord will return the deposit to the tenant. Most leases allow the landlord to keep all or part of the deposit if the tenant owes rent upon moving out or has caused property damage beyond normal wear and tear. Some of it may also be kept to pay for cleaning the premises for the next tenant.
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Copyright © 2000, 2002 American Bar Association
