One specific aspect of managing a rental property that appears completely simple is the security deposit. But in actuality, there are quite a lot of things that Vernal property owners must learn to handle a tenant’s security deposit correctly. Unlike a rental payment, a security deposit is not part of your investment income. On the contrary, there is a set of rules that you really need to follow to accept, deposit, and reimburse security deposit funds legally. You will indeed need to take in how much to charge and what you can legally and ethically use the security deposit to pay for once the tenant moves out. In this article, we’ll touch on the basics of security deposits so that you can handle them accurately, from the very beginning to the very end.
Determining How Much to Charge
Among the important 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 caught off guard to know that in many states, there is no set amount; it is typically up to the landlord to decide. But actually, there may be limits to how much you can charge, so you should meticulously go over your state and local laws in preparation for selecting a number. Most likely the most prevalent amount asked of tenants is a sum that is around the same as one month’s rent, plus maybe a cleaning deposit or pet deposit, if applicable. It’s nice thinking to do a little research on what other landlords in your area are charging in order to keep your rental rates competitive. Asking for too much of a security deposit could certainly drive potential tenants away.
Handling Security Deposit Funds
When you have the security deposit funds in hand, you’ll need to learn the guidelines in your state about where to keep them. Some states require landlords to preserve the security deposit in a separate, interest-bearing bank account. But certainly, others grant landlords a range of options of where to keep the funds. Heedless of where you live, though, you should keep careful records that note where the funds are held and be cautious not to spend them until you have a legal, documented reason for actually doing so.
When You Can (Legally) Keep Security Deposit Funds
On the other hand, there are various situations that entitle the majority of landlords to keep and use a tenant’s security deposit funds. The most accepted is to pay for repairs for damage to the property beyond normal wear and tear. For instance, a broken appliance, big holes in the walls, or excessively stained carpet may all be ethical reasons to keep a tenant’s security deposit. Though, 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.
Additional 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. But as a matter of fact, some states do not allow landlords to withhold security deposit funds to cover unpaid fines or late fees, and so again, make it a point to know quite well the regulations in your location.
Security Deposit Refunds
Immediately when your tenant moves out, you will need to firmly determine how much of their security deposit will be refunded. If the terms of the lease have been met in full, the landlord’s job is to return the entire refundable amount of the security deposit to the tenant. This refund must be provided within a precise timeframe in many states, usually within 30 days or less. If you like 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.
Despite that, even if your state doesn’t imply it, among the best practices of rental property management are to provide clear communication of any funds withheld to your tenant to avoid misunderstandings or, worse, legal action. Furthermore, 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.
So as you can obviously see, security deposit issues can be considerably more burdensome than they first appear. This is why some rental property owners rely on the expertise of the professionals at Real Property Management Uintah. Our local Vernal property management professionals have a vast awareness of the laws in your state. They can help safeguard 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 801-889-1517 today!
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