An aspect of rental property management that appears to be simple is the security deposit. There is, however, a lot for a Dacula property owner to learn about how to handle a tenant’s security deposit correctly. Unlike a rental payment, a security deposit is not part of your investment income. In fact, there are rules that one must follow about accepting, depositing, and reimbursing security deposit funds legally. Aside from knowing how much to charge, you must also know what you can legally and ethically use the security deposit to pay for when your tenant moves out. This article lays out the basics of security deposits so you can be guided in handling them from start to finish.
Determining How Much to Charge
Coming up with an appropriate figure for a security deposit is one of the major decisions a rental property owner has to make before advertising a rental for the first time. There are many states that leave this decision up to the landlord. Knowing this, you should make sure to check your state and local laws if there are any limits on how much you can charge before you finalize a figure. It is not unusual for landlords to request from their tenants a sum roughly equal to one month’s rent, as well as any cleaning deposits or pet deposits. You can research and compare what other landlords in your neighborhood charge so you can maintain a competitive rental rate. Asking too much for a security deposit could drive potential tenants away.
Handling Security Deposit Funds
When you receive the security deposit funds, you will need to be very familiar with the regulations of your state about where to keep them. Some states require landlords to keep the security deposit in a separate, interest-bearing bank account. Still, others let landlords decide where to keep the funds. No matter which state you live in, you must keep careful records that show where the funds are held. You should also not spend them except when you have a legal, documented reason to do so.
When You Can (Legally) Keep Security Deposit Funds
There are a few specific situations that allow most landlords to keep and use a tenant’s security deposit funds. Usually, it is to pay for repairs for damage to the property beyond normal wear and tear. For example, 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 if that carpet is more than seven years old and was due for replacement in preparation for your next tenant anyway, it is illegal to use the security deposit to pay for the replacement.
Other ethical reasons for keeping a portion of a tenant’s security deposit include cleaning costs, unpaid bills, or a broken lease, or nonpayment of rent. Some states, though, do not permit landlords to withhold security deposit funds as settlement for unpaid fines or late fees, so be sure to comply with the regulations in your location.
Security Deposit Refunds
As soon as your tenant moves out, you will have to determine how much of their security deposit will be refunded. If the terms of the lease have been met in full, the landlord’s responsibility is to return the entire refundable amount of the security deposit to the tenant. In most states, the refund has to be issued within 30 days or less. If you plan to withhold any part of the security deposit, make sure it comes with an itemized list of the repairs that were paid for with the funds.
Even if your state does not require it, one good rental property management practice is providing clear communication about any funds withheld to your tenant to avoid misunderstandings or legal action. In addition to that, a property owner who withholds the security deposit or an accounting record with a bill for amounts greater than the deposit for longer than the timeline prescribed by law could be penalized. That property owner might have to pay the tenant up to three times the amount of the deposit as a penalty.
Evidently, security deposit issues can become more complicated than they seem. Because of this, a lot of rental property owners rely on expert professionals at Real Property Management Executives Greater Atlanta. We have local Dacula property management professionals who have a very good grasp of the laws in your state. They can assist you in handling your security deposit, rent, and other matters with your tenant in an ethical, legal manner. Would you like to learn more? Contact us online or call at 678-765-8383 today!
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