Rent and Security Deposits
Paying rent is probably the simplest part of renting a house or apartment. The renter pays the rent according to these terms set in the rental agreement.
Security deposits are not a part of the monthly rent. A security deposit is a set amount of money paid at the start of renting a place. This sum of money is held by the landlord throughout the rental agreement or lease. It pays for any damage the renter caused in the unit until the end of the lease period. If there is damage, the renter will lose some of all of the money. Normal wear and tear should not lose the money, however.
Your state laws dictate how soon the security deposit money must be repaid after the lease ends. A landlord can keep a security deposit if there are unpaid rent or utility charges.
For Landlords: Handling the Rent and Security Deposit
There are steps you can take to minimize any confusion about rent and due dates. They can also help ensure rent payment on time. You should:
- Make sure the rent amount, due date, and method of payment are clearly written in the signed lease agreement
- Provide each renter with a receipt each time they pay rent (this could protect you in the event of a dispute)
The handling of tenant's security deposits may be part of your state's laws. Many states require landlords to keep deposits separate from other income (sometimes in an interest-bearing account). Keep in mind that many states limit the amount of the security deposit a landlord may request. This is typically based on the rental amount. For instance, some states limit the deposit to twice the amount of rent.
You can collect the last month's rent in addition to, or instead of, a deposit. But then you may not use the last month's rent to pay for repairs like you would with a security deposit.
For Renters: Security Deposits at a Glance
Most landlords require the payment of a deposit before the start of the lease period. This is either:
- Held in escrow (a third party account)
- Kept on file as a check or online deposit
When the lease ends, the landlord may use the deposit to pay for repairs or professional cleaning. If your landlord asks for last month's rent, keep in mind that this is not the same as a deposit (it is simply a prepayment).
Landlords may ask tenants for both first and last month's rent in addition to a deposit. If rent is $1,000 per month and the deposit is $500, you could end up paying $2,500 when you sign a lease. Ideally, you will get the $500 back when the lease ends.
As a tenant, don't assume your landlord will put the check into your file and return it all once your lease is up. Protect yourself by getting a written receipt for the deposit (and last month's rent, if applicable).
The receipt should include:
- The money paid
- The date when payment was received
- The purpose of the payment (i.e. "security deposit")
- The names of the parties involved
- The landlord or property manager's signature
Some states require landlords to pay interest on the security deposit and prepayment of last month's rent, so check your state laws. If the interest was 3% and you had to pay $1,000 for last month's rent and $500 for the deposit, you could make $45 in interest and get the $500 back.
Note the condition of the rental unit before you move in. Take photographs where necessary, document any issues, and have the landlord sign off. That way, the landlord cannot charge you for damage that existed before your lease. When it comes time to reclaim your deposit (or what's left of it), make sure the landlord gives you an itemized list of damages and written estimates.
If there are any issues with rent or getting your security deposit back, you can take the matter to small claims court.
Click on a link below to learn more about rent and security deposits for landlords or renters.