What’s the deal with security deposit laws in Iowa?
So here you are, a landlord in Iowa, and you may be wondering whether or not it’s necessary, or even a good idea to charge potential tenants a security deposit. The simple answer is, while it’s not necessary, it’s a good idea.
Security deposits act as just that – a deposit – for the tenant; for a landlord it’s more like an insurance policy in the event that tenants cause serious damage to the property. If you think about it, a security deposit could be considered incentive for tenants to treat their rented property well in the hopes of having all of their money returned to them. But, if they do damage or make unapproved changes to the property, then the landlord may use some or all of the deposit to repair it.
However, it’s best to exercise discretion if using any of the deposit when remedying damage. A couple of years ago, Iowa City attorney Chris Warnock won in two lawsuits against Big Ten Property Management, who were charged with improper deductions from a security deposit. Two former tenants said they had not received their full deposits after having moved out. Among these errant charges? $150 for leaving a window open, which didn’t even damage the property. In this case, the judge ruled in favor of the tenants and awarded $2000 in damages.
Obviously, this isn’t how you’d handle your tenants and security deposits, but it’s a great reminder of why it’s important to be diligent about how you receive, use, and return the security deposit. Read on to learn more about your responsibilities when it comes to charging and handling security deposits.
Do landlords need to charge tenants a security deposit in Iowa?
Landlords don’t have to charge tenants a security deposit, but they play a very important role in protecting the landlord in the event that the rental property sustains damage beyond what may be considered “normal wear-and-tear,” or if the tenant makes any unauthorized changes to the property. A security deposit may be used to repair damages or modifications.
What are the limits on rental deposits in Iowa?
- A deposit may not exceed the amount of two months’ rent.
- If a tenant decides to sublet, the deposit from the subtenant can be one month’s rent from the original lease.
For example, for a one bedroom in Cedar Falls that rents for $700/month, landlords cannot ask for more than $1,400 as a security deposit.
Do landlords need to provide a receipt for a security deposit?
No. Landlords are not required to provide their tenants with a written notice or receipt for a security deposit.
Does the money need to be kept in a separate account to allow it to accrue interest?
Yes, the deposit must be held in a bank, savings and loan association, or credit union, which must be insured by an agency of the federal government.
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Security deposits must be held in their own account, separate from any other funds. It’s a good idea to invest the deposit in an interest bearing account, as any interest accrued on the deposit within the first five years of tenancy will become property of the landlord. On the other hand, any tenant renting the same property for more than five years is entitled to any additional interest.
What can security deposit money be used for?
Iowa state law allows property owners to use money from the security deposit to cover the costs of:
- Unpaid rent
- The cost to repair damages to the property that exceed normal wear-and-tear. For example, remedying wallpaper or carpeting that wasn’t authorized.
- Legal costs associated with removing an uncooperative tenant from the property
What doesn’t the security deposit cover?
Landlords and property managers cannot use the security deposit to cover the cost of repairing normal “wear and tear.” This is defined as any minor damage incurred by the property simply by the act of living in it, such as minor scratches on the floor caused by furniture or shoes over time, or undamaged walls that just need a new coat of paint.
What is the deadline to return a security deposit in Iowa?
Once they’ve moved out of the property, the tenant has one year to provide the landlord with a forwarding address where the deposit can be sent. Landlords have 30 days after the termination of the tenancy, and receipt of the tenant’s contact information or mailing instructions, to either return the deposit, or inform the tenant of any repair costs that will be deducted from the deposit.
Do landlords need to notify renters of security deposit money used to fix damages?
Yes. After receiving the tenants’ new address, landlords have 30 days to provide them with an itemized list of damages and repair costs that part or all of the deposit will cover. If the landlord fails to provide such a list, they waive their right to keep or use the deposit, and it must be returned to the tenant in full.
Most importantly, be diligent. Promptly return the security deposit, and be thorough in cataloging any damages that the deposit will be used to repair. Keep track of bills and receipts related to materials and work. The better of a job you do, the less of a chance there will be for the tenant to challenge your claims in court.
Where can I learn more about Iowa Security Deposit laws?
If you have any questions, or think you may want to learn more about security deposit laws in Iowa, please consult a lawyer.
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