Before you rent a new home, you have to pay a security deposit to your landlord. Security deposits can range from a few hundred to thousands of dollars. Your landlord will ask for a security deposit before signing a lease, as a way to protect the property you’ll be renting.
With rental prices getting steeper each year, paying a hefty security deposit can feel like a big hit to your bank account. Ideally, at the end of your lease, you would want a full refund of your hard-earned money. Let’s discuss some essential tips for renters to keep in mind before paying a security deposit, and the importance of landlord-tenant laws that will protect your funds.
Different state laws set a maximum limit for security deposits. It’s illegal for your landlord to charge an amount higher than the specified amount in that state.
States like California place the limit at two month’s rent for unfurnished homes and three month's rent for furnished homes. New York and Massachusetts set a security deposit limit of one month’s rent. However, states like Florida, Colorado, Texas, and many more set no limit on the security deposit you need to pay your landlords.
As a tenant, you should know that it’s your landlord’s legal responsibility to keep your security deposit safe. Your landlord might be required to keep your deposit in a separate bank account. Your landlord must also provide you an invoice receipt after you pay the deposit.
For example: In Massachusetts, landlords must keep the deposit in a dedicated, interest-bearing account in a Massachusetts-based financial institution, and the landlord must pay accrued interest to the tenant annually (either 5% or the bank’s interest rate).
In this case, your landlord must inform you how much interest has been earned annually from your security deposit. They’re also responsible for informing you if the deposit has been transferred from one account to another.
Depending on your state, your landlord must also return the security deposit with interest within 14-60 days of your lease termination. Your landlord can keep any deductions and damage expenses as per your lease agreement.
It’s a no-brainer that you should always read your legal documents carefully before committing to them. Once you sign a lease, you’re legally bound to all its terms and conditions. Not fulfilling them can result in you losing your security deposit. It’s essential that you know what the landlord may legally deduct from your security deposit before you sign the lease.
For instance, In New Jersey, landlords can deduct only for damage and repairs (other than normal wear and tear) and unpaid rent.
In California, landlords can subtract deposits for damages beyond normal wear and tear. It also includes cleaning costs, unpaid rent, and future debts incurred due to violation of the lease agreement.
Take a tour around your new rental home and look for any existing damage. If anything’s damaged or broken, ask your landlord to repair it. Any damages incurred during the lease can cost you your security deposit. Always do the work of taking photos of the property and documenting it. Make sure to mention the damages and repair costs in your lease as a separate clause.
States like Arizona, California, Georgia, Kentucky, Maryland, Massachusetts, Michigan, Montana, Tennessee, Virginia, Washington, and Wisconsin make it mandatory for the landlord to do a walk-in inspection of the property before finalizing the lease.
Your landlord should return your security deposit by a reasonable time. The deadline can range from 14 days in states like Arizona or Vermont to 60 days in Arkansas.
You can always take action if your landlord fails to pay you before the deadline or refuses to pay you altogether. Before taking the matter to a claims court, you must write a demand letter to your landlord or broker.
Remember that your security deposit is rightfully yours. If you fulfill all the deeds of your lease, you should get all of that money back!