One component of managing a rental property that looks very simple and easy is the security deposit. Though, in actuality, there are plenty of things that San Gabriel property owners have to understand to handle a tenant’s security deposit correctly. Unlike a rental payment, a security deposit is not part of your investment income. But truth be told, there are a few rules that you are supposed to adhere to accept, deposit, and reimburse security deposit funds legally. You will even need to ascertain how much to charge and what you can legally and ethically use the security deposit to pay once the tenant moves out. In this article, we’ll check into the basics of security deposits so that you can handle them correctly, end to end.
Determining How Much to Charge
Among the weighty decisions that rental property owners need to make before advertising your rental for the first time is how much to ask for in a security deposit. You may be floored to learn that in many states, there is actually no given amount; it is typically up to the landlord to decide. But be aware, there may be limits to how much you can charge, so you should completely look into your state and local laws before finally choosing a number. Apparently, the most widely known amount usually asked of tenants is a sum that is about the same as one month’s rent, plus maybe a cleaning deposit or pet deposit, if applicable. It’s a great idea indeed to do a little research on what other landlords in your area are charging in order to always keep your rental rates competitive. Asking so much for a security deposit could definitely drive potential tenants away.
Handling Security Deposit Funds
When you have the security deposit funds in hand, you’ll need to understand the laws in your state about where to keep them. Some states require landlords to keep the security deposit in a separate, interest-bearing bank account. Indeed, others give landlords a range of options of where to keep the funds. Having said that, it doesn’t matter where you live, though, you should keep careful records that note where the funds are held and make sure not to spend them until you have a legal, documented reason to do so.
When You Can (Legally) Keep Security Deposit Funds
There are some specific situations that rightly allow landlords to keep and use a tenant’s security deposit funds. The most widespread is to pay for repairs for damage to the property beyond normal wear and tear. By way of illustration, a broken appliance, big holes in the walls, or excessively stained carpet may all be ethical reasons to keep a tenant’s security deposit. Although, if that carpet is more than seven years old and you would have replaced it for your next tenant anyway, it is illegal to withhold security deposit funds to pay for the replacement.
Few other ethical reasons to keep some or all of a tenant’s security deposit include cleaning costs, unpaid bills, and in some cases, a broken lease or nonpayment of rent. Besides, some states do not allow landlords to withhold security deposit funds to cover unpaid fines or late fees, and so again, see to it you truly understand the regulations in your location.
Security Deposit Refunds
When your tenant moves out, you will need to decide on how much of their security deposit will be refunded. If the terms of the lease have been met in full, the landlord’s accountability is to return the entire refundable amount of the security deposit to the tenant. This refund must be produced and given within a very specific timeframe in many states, usually within 30 days or less. If you want to withhold any portion of the security deposit, it is important to include an itemized list of the repairs that were paid for with the funds.
Despite the fact that your state doesn’t really require it, one of the best practices of rental property management is to provide clear communication of any funds withheld to your tenant to avoid misunderstandings or, worse, legal action. Likewise, if a property owner withholds the security deposit or an accounting record with a bill for amounts due above and beyond the deposit, longer than the amount of time prescribed by law; that property owner may have to pay the tenant up to three times the amount of the deposit as a penalty.
As you can undoubtedly see, security deposit issues can be substantially more complicated than they first appear. This is why quite a lot of rental property owners rely on the expertise of the professionals at Real Property Management Fairmate. Our local San Gabriel property management professionals have a total understanding of the laws in your state. They can help see to it that you handle your security deposit, rent, and other interactions with your tenant in an ethical, legal manner. Would you like to learn more? Contact us online or call at 626-691-9749 today!
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