Security Deposits

When landlords can keep the deposit, and when it must be returned.

The lease should clearly set out the requirements for the tenant's security deposit. A security deposit is almost always a good idea when you rent an apartment or residence. This deposit is designed to ensure that the tenant lives up to the promises made in the lease agreement. If the tenant breaks the lease or causes excessive damage to the rental unit, the landlord can use the deposit to offset the additional costs that result.

It's important to note that the security deposit is not intended to serve as a substitute for rent. Many tenants think that they can skip their last month's rent payment and have the landlord use the security deposit as compensation. In fact, some state laws actually prohibit a landlord from applying a security deposit toward unpaid rent.

State laws that regulate security deposits in residential rental agreements vary so widely that it's impossible to describe them all in detail here. In general, however, these laws regulate the maximum amount that can be charged as a security deposit, and they can also restrict the landlord's use of the deposit. For example, most states require that security deposits be placed in escrow, and some states require the landlord to place the deposit in an interest bearing bank account, and pay the interest to the tenant. When the tenant moves out, the landlord is required to either return the deposit within a specified period of time (such as 30 days) or notify the tenant in writing why all or some of the deposit is being withheld. The landlord may be legally required to provide the former tenant with an itemized list of the damage claimed.

If a former tenant disputes the damage claim, a trip to court may be required to settle the matter. In many states, small claims court will be the court with jurisdiction over a security deposit dispute. If the court finds that the landlord was not justified in keeping the deposit, some states can require the landlord to pay a sum equal to two or three times the actual amount of the deposit.

Besides a security deposit, some landlords also charge a non-refundable cleaning deposit. This deposit is used to cover the cost of painting, carpet cleaning and other expenses the landlord will incur when the tenant leaves. If the landlord accepts pets, a pet deposit may also be required to cover the expense of removing pet stains and odors from the rental unit when the tenant moves out.