What is a security deposit?
Updated June 21, 2021
A security deposit is a one-time payment a tenant makes to a landlord before moving into a property. The money acts as insurance, in case the renter damages the apartment or house, the fixtures or materials or breaks the lease without notice. In any of these circumstances, the landlord may keep part or all of the security deposit after the tenant moves out.
Amount of a Security Deposit
Most often, the amount of a security deposit is equivalent to one month’s rent. For example, if a home or an apartment rents for $5,000 per month, the security deposit would also total $5,000.
Security deposit amounts vary by state across the U.S., however. States, such as New York, limit security to one month’s rent, while others limit a deposit to two months’ rent. Several states have no statutory limit on security deposits, so the fee is up to the landlord.
Security deposits are often larger when you have a pet moving in with you. Credit: Sarandy Westfall/Unsplash
Other factors that influence the amount of a security deposit include a property’s amenities, such as elevators, laundry facilities, on-site parking, doormen and staff in an apartment building, furnishings, overall condition, recent renovations, a tenant’s history and the current rental market.
Pet fees or deposits can be an additional amount that’s expected on top of the security deposit. Some landlords will add a fee to the one month’s security, for example, a $1,500 security deposit and a $500 pet deposit for a total of $2,000. Other landlords will add a pet fee separately. Pet fees are sometimes not refundable.
What Else to Know About Security Deposits
The lease should detail any pertinent information about the security deposit, such as the amount, due date, conditions, if or when the deposit amount would be returned to the renter and reasons the deposit would not be refunded.
Security deposits usually must be paid with a cashier’s check, money order or an electronic payment. These methods ensure that the funds are available at the time of lease signing.
Some states require landlords to keep security deposits in interest-bearing bank accounts. Therefore, a security deposit may accrue interest.
Certain states require landlords to issue the tenant a receipt of security deposit within a specific time, say 30 days.
Just as some states set limitations on security deposit amounts, states’ policies vary on when the security deposit should be returned to the tenant. Laws dictate the time frame for legally refunding a security deposit. For instance, landlords in New York must return deposits within 14 days, but Alabama landlords have 60 days to process a refund. Check the law in your state.
(If you’re renewing a lease, you may be asked to add additional funds to a security deposit.)
A property owner may also decide that a security deposit can be applied to the final month’s rent of a lease term. In this case, a tenant would not be responsible for making the last rent payment and the landlord would not return the deposit after the renter moves out.
If the landlord decides to keep part or all of the deposit, they should provide an itemized statement showing why any amount was withheld.
Reasons A Landlord Wouldn’t Refund a Security Deposit
- The renter does not leave the apartment or house clean, or in the condition they found it when they moved in.
- The tenant made adjustments or improvements without permission from the landlord.
- The property was damaged beyond normal wear and tear and the tenant did not repair the damages.
- When utilities are included in the monthly rent and the renter accumulates higher-than-average utility bills.
- The tenant fails to remove all personal belongings when vacating the premises.
- A property owner schedules a move-out inspection and the renter is a no-show.
- The lessee neglects to pay the last month’s rent.
- The renter doesn’t return all property keys to the landlord.
Negotiating a Security Deposit
If a prospective tenant has an excellent credit history and employment showing the ability to make the monthly payments without issue, he or she may be able to negotiate the security deposit for a lesser fee.
Likewise, a landlord may be flexible and work with a tenant and spread the security deposit over the course of the first year’s lease. In that case, the tenant wouldn’t be responsible for paying the full deposit before moving in.
Security deposits are a necessary evil in the real estate rental world. Anyone preparing to lease an apartment or home should also be ready to pay a minimum of one month’s rent for a security deposit at the lease signing.