One portion of managing a rental property that sounds totally uncomplicated is the security deposit. But really, there are lots of things that La Mesa property owners ought to ascertain in order to handle a tenant’s security deposit correctly. Unlike a rental payment, a security deposit is not part of your investment income. But instead, there are guidelines that you are required to keep to accept, deposit, and reimburse security deposit funds legally. You will additionally need to understand how much to charge and how you can legally and ethically use the security deposit to pay for wear and tear once the tenant leaves. In this article, we’ll go through the basics of security deposits so that you can handle them correctly, beginning to end.
Determining How Much to Charge
One of the major decisions that rental property owners need to make before advertising your rental for the first time is how much to ask for in a security deposit. You may be astounded to understand that in many states, there is no required amount; it’s usually up to the landlord to decide. However there may be limits to how much you can charge, so you should thoroughly look over your state and local laws just before deciding on a number. Seemingly, the most common amount usually asked of tenants is a sum that is roughly the same as one month’s rent, plus maybe a cleaning deposit or pet deposit, if applicable. It’s a brilliant idea to do a little research on what other landlords in your area are charging in order to make your rental rates competitive. Asking too much of a security deposit could drive potential tenants away.
Handling Security Deposit Funds
After you have the security deposit funds in hand, you’ll need to ascertain the directives in your state about where to keep them. Some states require landlords to preserve the security deposit in a separate, interest-bearing bank account. Having said that, others present landlords with a range of options of where to keep the funds. It doesn’t matter where you live, though you should keep careful records that note where the funds are held and make sure not to spend them until you have a legal, documented reason for doing so.
When You Can (Legally) Keep Security Deposit Funds
There are certain specific situations, on the other hand, that make some landlords keep and use a tenant’s security deposit funds. The most widely known is to pay for repairs for damage to the property beyond normal wear and tear. As an illustration, a broken appliance, big holes in the walls, or excessively stained carpet may all be ethical reasons to keep a tenant’s security deposit. But certainly, if that carpet is more than seven years old and you would have replaced it for your next tenant anyway, it is illegal to withhold security deposit funds to pay for the replacement.
Other common ethical reasons to keep some or all of a tenant’s security deposit include cleaning costs, unpaid bills, and in some cases, a broken lease or nonpayment of rent. Having said that, some states do not allow landlords to withhold security deposit funds to cover unpaid fines or late fees, and so again, make certain to learn the regulations in your location.
Security Deposit Refunds
When the time comes that your tenant moves out, you will need to firmly decide how much of their security deposit will be refunded. If the terms of the lease have been met in full, the landlord’s charge is to return the entire refundable amount of the security deposit to the tenant. This refund must be given back within a clear timeframe in many states, usually within 30 days or less. If you choose to withhold any portion of the security deposit, it is important to include an itemized list of the repairs that were paid for with the funds.
Though your state doesn’t call for it, one of the best practices of rental property management is to provide clear communication of any funds withheld to your tenant to avoid misunderstandings or, worse, legal action. Additionally, if a property owner withholds the security deposit or an accounting record with a bill for amounts due above and beyond the deposit, longer than the amount of time prescribed by law; that property owner may have to pay the tenant up to three times the amount of the deposit as a penalty.
As you can very well see, security deposit issues can be much more complex than they first appear. This is why a lot of rental property owners rely on the expertise of the professionals at Real Property Management Realevate Specialists. Our local La Mesa property management professionals have complete info on the laws in your state. They can help see to it that you handle your security deposit, rent, and other interactions with your tenant in an ethical, legal manner. Would you like to learn more? Contact us online or call at 858-997-2100 or 951-461-0100 today!
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