The security deposit, though often seen as a minor part of rental property management, is actually very important. Being a property owner in San Gabriel means you must be aware of the rules regarding tenant security deposits. Unlike rental payments, a security deposit doesn’t form part of your investment income. Specific regulations must be followed for accepting, depositing, and returning security deposits.
Knowing these guidelines enables you to determine the right amount to charge and the legal and ethical use of the security deposit after tenant departure. We will explore the fundamentals of security deposits in this article, giving you the information needed to manage them correctly from start to finish.
How much should you charge for a security deposit?
Deciding the amount to charge for a security deposit is a crucial step before advertising a rental property. Be aware of state and local laws regarding security deposit limits as they vary by location, and check them before setting an amount.
Commonly, tenants are required to pay a security deposit equal to one month’s rent, along with a cleaning or pet deposit. To stay competitive, research the security deposit amounts charged by other landlords in your area. A high security deposit request may discourage potential tenants.
Ethically handle security deposit funds
It’s crucial to understand your state’s regulations on where to store the security deposit once you have the funds. In certain states, landlords are mandated to keep the security deposit in an interest-bearing account, while other states provide multiple options.
Despite the local rules, a key part of responsible property management is tracking the deposit’s location and not using the funds without a legal, documented reason.
Stay responsible with tenant security deposits
There are particular cases where landlords are allowed to hold and use a tenant’s security deposit. Typically, this is to cover repair costs for damages that go beyond normal wear and tear. This might involve fixing a broken appliance, repairing major wall damage, or cleaning heavily stained carpet.
Note that it is illegal to withhold security deposit funds for projects not related to tenant-caused damage beyond normal wear and tear. Adhering to these legal and ethical rules makes you a fair and responsible landlord.
Other legitimate reasons to retain a tenant’s security deposit are cleaning costs, unpaid bills, and sometimes a broken lease or unpaid rent. However, some states restrict landlords from using security deposit funds for unpaid fines or late fees, so always be aware of your local regulations.
Refund security deposits to tenants
After your tenant vacates, you need to determine how much of their security deposit will be returned. If the lease terms are satisfied, the landlord must return the full refundable amount of the security deposit. Many states require this refund to be issued within a certain timeframe, generally 30 days or less. When withholding a portion of the security deposit, it is essential to include an itemized list of repairs paid for with the funds.
Regardless of state requirements, clearly informing your tenant about any withheld funds is a best practice to avoid misunderstandings or legal issues. If a landlord delays returning the security deposit or providing an itemized bill for deductions, they may have to pay the tenant up to three times the deposit as a penalty.
The complexities of security deposit issues can often exceed initial expectations. Rental property owners in San Gabriel turn to the professionals at Real Property Management Fairmate for their expertise. With in-depth knowledge of state laws, our local property management professionals can help you manage security deposits, rent, and tenant interactions ethically and legally Contact us online or call at 626-691-9749 today!
Originally Published on June 18, 2021
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