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Security deposit tips for property managers, landlords, and tenants

Accounting & Bookkeeping Legal Concerns

What is a Security Deposit?

A security deposit is an amount of money—ranging from hundreds to thousands of dollars—that a tenant pays a landlord or property manager at the beginning of a lease, above and beyond the first or last month’s rent. The security deposit check is typically kept by the landlord or property manager in a separate, interest-bearing bank account; and it’s returned to the tenant when he or she moves out at the end of their lease. However, if a tenant damages the property, the landlord or property manager will use some or all of money in the security deposit account to pay for repairs.

The security deposit has long been a bone of contention between tenants, landlords, and property management companies. Some courts are awarding double damages to tenants suing their landlords for not returning their security deposits.

This post will provide guidance for property managers, landlords, tenants, and others navigating the issue of security deposits. It will discuss the laws in each state, provide advice from landlords and property managers, and address commonly asked questions about security deposits.

Security Deposit Tips for Tenants

If you’re looking to rent, following this simple advice will help you to avoid getting scammed.

  1. Don’t be afraid to negotiate.

    Remember that security deposits can be negotiable. There are no minimum amounts that property managers or landlords have to charge for security deposits.

  2. Know how much of a security deposit you’ll need to pay.

    There are some state laws that set the maximum amount you can be charged. Some states (such as Massachusetts) place the limit at one month’s rent, while others (like Nevada) place the limit at three months’ rent. Other states, however—including Florida, Ohio, and Texas—don’t stipulate how much a property manager or a landlord can charge for a security deposit. See our property management law section for specific states’ security deposit guidelines.

  3. Read your lease before you sign it.

    State laws vary on what landlords can deduct from your security deposit for property damage and unpaid rent. Make sure that you know what you’re committing to before you sign on the bottom line.

  4. Think twice before paying less than a month’s rent as a security deposit.

    Sure, it sounds easier at first—but getting a full month’s rent back (minus damages) when you move out can really help with moving expenses, as well as paying the security deposit on your next rental.

  5. Understand any additional fees that you might be charged when you leave.

    Pin down your landlord’s expectations now for when you move out. Will you be charged a cleaning fee, for example? It’s better to know now than to be surprised when you don’t receive your full security deposit at the end of your lease. State laws vary on these types of fees, so be sure to know your rights, too.

  6. Take a look around your new rental and point out any existing damage.

    If anything’s broken, ask your landlord to fix it. If you wait to say something, the repair cost might come out of your security deposit. A good idea is to take photos of the property to document any pre-existing flaws.

  7. Know that your landlord can’t keep your security deposit if you break your lease.

    This is your money, held in a trust account, unless you forfeit some or all of it through damage to your rental unit. They can, however, keep your last month’s rent and sue for any other unpaid rent.

  8. Confirm when you’ll get your security deposit back.

    Again, the laws vary; New York law only states that the security deposit should be returned within a “reasonable time,” but the time period typically ranges from 14 days (Vermont) to 60 days (Arkansas). For information on the specific laws in your state, see Nolo’s Deadline for Returning Security Deposits, State-by-State.

  9. Take action if your landlord refuses to return your security deposit.

    According to a Rent.com survey, 26% of renters don’t get their security deposit back when they move, and 36% of those renters received no explanation from their landlord. After waiting the state-mandated amount of time without seeing all or part of your security deposit, consider writing your landlord or property manager a demand letter for the return of the security deposit. Download the form, fill it out, and keep a copy. This will ensure that you have a paper trail in case you decide to take them to court.

Security Deposit Tips for Landlords & Property Managers

Property management firms can also follow a few steps to avoid problems when it comes to security deposits:

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  1. Know the laws in your state.

    Learn where you should keep deposits, how much you can collect, how quickly it needs to be deposited into a specific security deposit account, how interest should be paid, any reports that are required, etc. It’s important to understand that security deposits for residential properties are controlled by statute calling for nondiscriminatory and equal treatment. It is a prohibited, discriminatory practice to charge a family a different amount then an applicant without children. It is also prohibited by law to require an excessive amount for the security deposit. Check the laws pertaining to security deposits in your state for specific guidelines.

  2. Don’t be tempted to charge less than you’re entitled to.

    While it may seem advantageous to lower the security deposit amount to attract more tenants, you run the risk of creating headaches down the road. As Salvatore J. Friscia of San Diego Premier Property Management explains in his blog post on how much to charge for a security deposit, there are 3 good reasons for this: 1. It weeds out financially unstable tenants; 2. It’s a hedge against rent default; and 3. It prevents tenants moving out unannounced.

  3. Security deposit checks are not extra rent.

    …so don’t treat them as such. These deposits need to be returned to your departing tenant, even if they’re behind on rent, assuming that there’s no damage to the unit.

  4. Get it on video.

    This tip comes from Mary Yetter-Hurd of Rent Smart Missoula: “The move-out inspection and [resulting] deductions to the security deposit is the most contested and potentially hostile situation in the landlord-tenant relationship. It is for that reason that we conduct a move-in video prior to turning over possession at the beginning of the tenancy. It fully documents the condition of the property at the time of move-in. We also provide the tenants a copy to the links so they have the documentation as well. If you can incorporate video documentation into your move-in process, it will go a long way in resolving a security deposit dispute long before it starts.”

  5. Establish trust or escrow accounts for security deposits.

    Make sure that your bank knows the deposit account is for “trust” or “escrow” funds. This will prevent the forfeiture of these funds in the unlikely event that you or your company encounter legal issues.

  6. Keep security deposits in a separate trust or escrow account that’s under your control.

    Even if state regulations allow you to mix security deposit funds with rent or turn them over to the rental owner, you should always keep them in a separate trust or escrow account. Never mix accounts—it’s far too easy to accidentally spend the security deposit funds.

  7. Property management is a different beast than real estate sales.

    Security deposits are not the same as pre-sales earnest money or down payments—different rules apply.

  8. Just because you can legally handle escrow monies doesn’t mean that you should.

    Even if you have a broker’s license, you should get trained before handling security deposits, or consider hiring someone with more experience. A person who can perform a self-audit is worth their weight in gold.

  9. Make sure that your property owners are in the loop.

    Take steps to ensure that your property owners are aware of your policies and procedures on handling security deposits. One California property management company, Portola Property Management, made a video to communicate that information to their current and future owners. A reliable property management software like Buildium can streamline this process significantly.

  10. Let tenants know why they’re not receiving their deposit back in full.

    If you do need to deduct from a tenant’s security deposit because of damage they’ve caused to a unit, send them an itemized list of the issues you found and the cost to repair each of them. If you walk through the unit with them, pointing out each issue, then follow up with an itemized list, you’re unlikely to have problems—especially if they’re given the chance to correct issues before they move out.

Frequently Asked Questions About Security Deposits

Security deposits are a valuable tool for preventing damage and protecting owners’ investments, but they do come with a level of responsibility. Handling them correctly will keep things running smoothly and ensure that property managers stay on the right side of the law.

  1. Do property managers need to give tenants a written statement of condition?

    Whether your state requires it or not, it’s a good idea for property managers to give their tenants a written statement about the condition of the property when they move in. (Be sure that both you and your tenant sign the statement.) This way, there will be no question about whether or not that hole in the wall was there before the tenant moved in.

  2. Can you deduct damages from the security deposit? What about unpaid rent?

    When a tenant moves out, do a final walk-through of the property together, noting any damage. It’s a good idea to bring along a digital camera so that you can justify any deductions in case there’s a dispute. You can do this before the lease ends to give them a chance to fix any issues themselves. Property managers have the right to deduct from the security deposit for any new damage that they find. You can’t deduct for “normal wear and tear,” so be sure to develop an understanding of what this includes. Depending on where you live, property managers may be able to deduct for unpaid rent as well; again, check the laws in your state to be sure.

  3. How quickly do property managers need to refund a security deposit once a tenant moves out?

    Whether or not a property manager deducts for damage, many states have rules about the allotted timeframe for refunding security deposits. For example, in Massachusetts, property managers must refund security deposits or provide tenants with a detailed list of damages and the cost of repairs within 30 days. If a landlord fails to do this, he loses his right to deduct anything from the security deposit—no matter how much damage the tenant caused.

If you enjoyed this article, you might enjoy reading our post on utilizing surety bonds as an alternative to security deposits. Additionally, we recommend checking out Buildium Property Management Laws, our database that covers security deposit laws by state.

Do you have advice to share about security deposits? Leave a comment below to join the discussion.

Last, be sure to subscribe to the Buildium blog to stay up-to-date on industry news and the issues you care about. Click here to sign up now!

Geoff Roberts

Geoff Roberts

Geoff is a marketer, surfer, musician, and writer. He lives in San Diego, CA.

  • Melanie Butler

    The landlord CAN keep the deposit if the tenant breaks their lease. The lease is a contract for a certain amount of money to be paid over a certain period of time, typically in monthly installments. When a tenant breaks their lease, and fails to fulfill the contract as agreed, they are in default. Default does not alleviate the responsibility for paying the contracted amount. The only thing that would relieve the tenants’ responsibility to pay, in most states, is if the property is leased to a subsequent tenant prior to the expiration of the original defaulted lease.

    • Jennifer Nodine

      I agree…I thought that sounded wrong too. That would fall under unpaid rent, which is a valid deduction. Unless the property is re-rented immediately and there is no lapse in between tenancies, which would be pretty unlikely IMO.

  • Melanie Butler

    The landlord CAN keep the deposit if the tenant breaks their lease. The lease is a contract for a certain amount of money to be paid over a certain period of time, typically in monthly installments. When a tenant breaks their lease, and fails to fulfill the contract as agreed, they are in default. Default does not alleviate the responsibility for paying the contracted amount. The only thing that would relieve the tenants’ responsibility to pay, in most states, is if the property is leased to a subsequent tenant prior to the expiration of the original defaulted lease.

    • Jennifer Nodine

      I agree…I thought that sounded wrong too. That would fall under unpaid rent, which is a valid deduction. Unless the property is re-rented immediately and there is no lapse in between tenancies, which would be pretty unlikely IMO.

  • tabby

    If the tenant was not required by the landlord to pay a security deposit would the tenant still be responsible for damages even when the landlord broke the lease for no reason?

    • Jennifer Nodine

      Anyone who damages real property is liable for repairs. They can try to collect from you and sue if you don’t pay. However, if they broke the lease as you say, you may be able to file a counterclaim against them for moving expenses and any other possible damages you incurred as a result of their breach.
      More than likely, they’ll try to collect by sending you a scary letter, but wont follow through with a suit if they are guilty of contact breach knowing they might end up having to pay you in the end.
      I should add that if the damages are excessive,like iif you trashed the place in retaliation for being asked to vacate, then all bets are off and you can expect to be dragged into court. Good luck.

      • boisebound

        If a tenant damages property, such as breaking a toilet, can i require them to pay for that damage at the time it occurs so that the security deposit is still available to cover other possible issues when they ultimately vacate the property.

    • Brittany

      um yes lol

  • tabby

    If the tenant was not required by the landlord to pay a security deposit would the tenant still be responsible for damages even when the landlord broke the lease for no reason?

    • Jennifer Nodine

      Anyone who damages real property is liable for repairs. They can try to collect from you and sue if you don’t pay. However, if they broke the lease as you say, you may be able to file a counterclaim against them for moving expenses and any other possible damages you incurred as a result of their breach.
      More than likely, they’ll try to collect by sending you a scary letter, but wont follow through with a suit if they are guilty of contact breach knowing they might end up having to pay you in the end.
      I should add that if the damages are excessive,like iif you trashed the place in retaliation for being asked to vacate, then all bets are off and you can expect to be dragged into court. Good luck.

    • Brittany

      um yes lol

  • Lisa M. Behrent

    our property management said they will only issue one check with both tenants names on it for the return of the security deposit. We each paid our own half of the security deposit when we moved in. This will be very inconvenient to have one check made out to both of us as we don’t live in the same state as the apartment we rented. Why can’t they give us each a check for half the security deposit?

    • Jennifer Nodine

      I’m pretty sure that the law requires they write one check for the deposit refund. I’m not a lawyer but I did read that somewhere recently. I’m sure it’s a pain for you but I suggest having the person who receives the check cut a check for half to the other. As far as signing the back before depositing, I wouldnt even worry about that. He or she can sign the other party’s name and place their initials next to the signature. Most of the time the banks don’t really check the endorsement signatures on the back, especially if it’s deposited in an ATM. If you think there’s a chance they might try keeping all the money, you may want to draw up an agreement that you can both e-sign before the check is received. Hopefully everyone plays by the rules and you get back all you deserve.

  • Lisa M. Behrent

    our property management said they will only issue one check with both tenants names on it for the return of the security deposit. We each paid our own half of the security deposit when we moved in. This will be very inconvenient to have one check made out to both of us as we don’t live in the same state as the apartment we rented. Why can’t they give us each a check for half the security deposit?

    • Jennifer Nodine

      I’m pretty sure that the law requires they write one check for the deposit refund. I’m not a lawyer but I did read that somewhere recently. I’m sure it’s a pain for you but I suggest having the person who receives the check cut a check for half to the other. As far as signing the back before depositing, I wouldnt even worry about that. He or she can sign the other party’s name and place their initials next to the signature. Most of the time the banks don’t really check the endorsement signatures on the back, especially if it’s deposited in an ATM. If you think there’s a chance they might try keeping all the money, you may want to draw up an agreement that you can both e-sign before the check is received. Hopefully everyone plays by the rules and you get back all you deserve.

  • Patricia

    can the landlord request more than the security deposit for repairs? Is there a limit on repair costs? In Florida.

  • Patricia

    can the landlord request more than the security deposit for repairs? Is there a limit on repair costs? In Florida.

  • karen

    I have a question can a manger stay with ur deposit when u haven’t even moved in or haven’t been approved yet I applied but just gave a security deposit to hold the unit but I called and told the manger im not going to rent their what can I do

  • karen

    I have a question can a manger stay with ur deposit when u haven’t even moved in or haven’t been approved yet I applied but just gave a security deposit to hold the unit but I called and told the manger im not going to rent their what can I do

  • Lacey Jr Douglas

    After our year lease was up we never singed another lease but staid there for another year does this automatically turn in to a month to month or day to day?

    • Brittany

      after your lease is up and you continue to stay it automatically becomes a month to month. cause your not obligated to stay there any more but in order for you to leave or the land lord to get you to leave requires a 30 days notice on either party

  • Lacey Jr Douglas

    After our year lease was up we never singed another lease but staid there for another year does this automatically turn in to a month to month or day to day?

    • Brittany

      after your lease is up and you continue to stay it automatically becomes a month to month. cause your not obligated to stay there any more but in order for you to leave or the land lord to get you to leave requires a 30 days notice on either party

  • Dave

    Are there any companies out there which handle security deposits for landlords? As in, you can send them there, they hold it, they send out statements of interest each year, and then you ask them to cut a check when it’s time to return? Thanks.

  • Dave

    Are there any companies out there which handle security deposits for landlords? As in, you can send them there, they hold it, they send out statements of interest each year, and then you ask them to cut a check when it’s time to return? Thanks.

  • jason

    can my manager take money out of rent that I pay then say im late because he took money for a broken window? and he stole my sons bike and threw it in the trash he has been throwing all of the kids toys around the apartments.

  • jason

    can my manager take money out of rent that I pay then say im late because he took money for a broken window? and he stole my sons bike and threw it in the trash he has been throwing all of the kids toys around the apartments.

  • Jus me

    I’m looking to rent from a private owner. Just did a property check and the names don’t match. I’ve never rented privately before. Should I be worried about that? Also, how do I submit the deposit? What form of payment should I be asked to use?

  • Jus me

    I’m looking to rent from a private owner. Just did a property check and the names don’t match. I’ve never rented privately before. Should I be worried about that? Also, how do I submit the deposit? What form of payment should I be asked to use?

  • Alexandra

    If you move into a place with someone, and they’re the ones who paid the damage deposit, but then decide halfway through the month that they don’t wanna live there anymore, but they never gave the landlord 30 days notice, does that mean that the deposit gets passed onto you and you have to pay that same amount back to the person leaving or does the landlord get to keep the money and then ask you for the damage deposit as well?

  • Alexandra

    If you move into a place with someone, and they’re the ones who paid the damage deposit, but then decide halfway through the month that they don’t wanna live there anymore, but they never gave the landlord 30 days notice, does that mean that the deposit gets passed onto you and you have to pay that same amount back to the person leaving or does the landlord get to keep the money and then ask you for the damage deposit as well?

  • nicole

    We have lived in our apt gor more than 4 yrs and there is new management. They havent even fixed the maintenance problems that they have promised to fix and they want us to pay a deposit all over again for a place that they cant even do there own jobs.

  • nicole

    We have lived in our apt gor more than 4 yrs and there is new management. They havent even fixed the maintenance problems that they have promised to fix and they want us to pay a deposit all over again for a place that they cant even do there own jobs.

  • Insight_Incite

    “Think twice before paying less than a month’s rent as a security deposit.”
    What moron put this tip into place? A better place would be to put the difference in a savings account, earn some interest and be in control of the money!! It’s like saying a large tax refund is a good thing!!

  • Insight_Incite

    “Think twice before paying less than a month’s rent as a security deposit.”
    What moron put this tip into place? A better place would be to put the difference in a savings account, earn some interest and be in control of the money!! It’s like saying a large tax refund is a good thing!!

  • jdr

    We rented out our Florida home. The tenant gave the RE agent a security deposit and first and last months rent. The RE agency gave us a check for the first month rent less their commission. The tenant paid us monthly and paid the last month in advance because they were going away. One month before the end of the lease, we told the RE agency that we had rec’d the last months rent, inspected the property and wanted the agency to return all deposit monies to the tenant. The RE agency refused to do this. One month later they said they would only issue a check for the security deposit is we released them of all obligations. We signed the off on this and they finally sent the tenant a check for the security deposit. They have not given either the tenant or us a check for the last months rent. It’s not the agency’s money. Since I requested ALL deposits to be refunded to the tenant, is the agency right to hold back the last month’s rent?

  • jdr

    We rented out our Florida home. The tenant gave the RE agent a security deposit and first and last months rent. The RE agency gave us a check for the first month rent less their commission. The tenant paid us monthly and paid the last month in advance because they were going away. One month before the end of the lease, we told the RE agency that we had rec’d the last months rent, inspected the property and wanted the agency to return all deposit monies to the tenant. The RE agency refused to do this. One month later they said they would only issue a check for the security deposit is we released them of all obligations. We signed the off on this and they finally sent the tenant a check for the security deposit. They have not given either the tenant or us a check for the last months rent. It’s not the agency’s money. Since I requested ALL deposits to be refunded to the tenant, is the agency right to hold back the last month’s rent?

  • Kathy Collins

    Great article for sure. However, I want to add some tips concerning tenants. If they want to get their security deposit back, reading the lease carefully and conformation from a landlord are not enough. They have to maintain their rental in good shape. As it’s written in the article https://rentberry.com/blog/get-security-deposit-back. Renter’s should to inform their landlords about maintenance issues, ask to attend the landlord’s final property inspection, confirm your cleaning plans with your landlord, etc.

  • Portiqo

    This post shares some great insights on security deposits and it is quite an important factor for both the land owner and the tenant. This is a must read article for Property owners, Managers and tenants.

  • Lauren Holden

    I live in Florida and I have a deposit to hold a house for 30 days to give me time to move in. Now the property manager is stating I have a false rental history and forged my income so they want to keep the deposit and the house is already back on the website for rent!! I was honest with all my information I gave. The worst part is I gave a cashier check and can’t stop the payment.

  • Beverly Mayers

    If your old property management company gave notice to landlord two months prior to end of lease, new property management company was put into effect. What is legal time frame that the security deposits are to be returned to the owner.
    The tenants have signed on for another year. Washington state is were the lease is.

  • Alicia Taylor Thomas

    Our property manager will only do the move out process if we sign another management agreement. Is that legal?

  • Deborah Anne Davis-Haight

    If a landlord with 8 units in each apartment building (in NYS) does not give written notice or proof that they have deposited a tenant’s security deposit into a separate interest earning account at the time of move in, and the lease is now almost up, does the landlord forfeit their right to the security deposit?

  • Calo99

    Can a landlord use the security deposit to prorate rent for the tenant leaving personal belongings in the property after they physically move out?

  • Chris Wang

    Hi.. I am a landlord and I have refunded most of the security and withheld just a small portion until the repairs are done. It has been more than 21 days that tenant has left but I noticed that they paid one day of less rent and paid it late. Can I still deduct the unpaid rent and late fee from the amount withheld for repairs? If so, what to do if the repair cost is more than withholding?
    Thanks a lot in advance!

  • First Last

    I have a security deposit from my tenants. They have moved out, the lease is up in 2 days. I gave them an itemized list of deductions (via email), and they said they’d come bu to pick it up, but they haven’t. I don’t have a forwarding address for them. What should I do?

    • Jacob Hafer

      Good for you sir for being a good person!

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