One of the seemingly simple aspects of managing a rental property is the security deposit. However, there is still much that a Tampa property owner has to learn about handling a tenant’s security deposit correctly. Unlike a rental payment, a security deposit is not part of your investment income. Instead, there are rules for accepting, depositing, and reimbursing security deposit funds legally. Among these are how much to charge and what you are allowed to legally and ethically use the security deposit to pay for in the event that the tenant moves out. Here are some of the basics of security deposits that can help your property handle them from the moment you receive them to when you return them.
Determining How Much to Charge
The decision of how much security deposit to ask is one of the biggest a rental property owner makes even before advertising a rental. Many states don’t prescribe an amount and let the landlord decide what that figure will be. There could be limits, however, to how much you can charge, so you have to check your state and local laws carefully before finalizing any figure. An amount similar to one month’s rent is usually requested from most tenants, plus applicable cleaning deposits or pet deposits. Researching about what other landlords in your area charge for similar property will help keep your rental rates competitive. A steep security deposit could discourage potential tenants.
Handling Security Deposit Funds
After receiving the security deposit funds, you have to know the rules in your state about where to keep them. Some states require landlords to keep the security deposit in a separate, interest-bearing bank account. Others give landlords options of where to keep the funds. Regardless of where you may be living, it is wise to maintain careful records of where the funds are kept. You must also not spend the funds without a legal, documented reason to do so.
When You Can (Legally) Keep Security Deposit Funds
There are a few specific situations that allow most landlords to keep and use a tenant’s security deposit funds. The most common is to cover repairs for damage to the property beyond normal wear and tear. A broken appliance, a big hole in the wall, or excessively stained carpet maybe some of the ethical reasons for you to keep a tenant’s security deposit. However, if that carpet is more than seven years old, and was already due for replacement for your next tenant, it would be illegal to withhold the security deposit to cover the cost of the replacement.
Some other valid reasons to keep a part of your tenant’s security deposit are cleaning costs, unpaid bills, or a broken lease, or nonpayment of rent. Bear in mind that some states don’t allow landlords to withhold security deposit funds to settle unpaid fines or late fees, so be sure to check the regulations in your location.
Security Deposit Refunds
When your tenant moves out, you have to determine the portion of their security deposit to be refunded. If the tenant has complied with all the terms of the lease, the landlord’s responsibility is to return the refundable amount of the security deposit to the tenant in its entirety. In most states, landlords are given 30 days or less to issue the refund. If you will be withholding any portion of the security deposit, you must prepare an itemized list of the repairs that were used by the funds.
Even when your state does not require it, you should clearly communicate any funds to be withheld to your tenant to avoid misunderstandings or legal action. This is one of the best practices of rental property management. Also, if a property owner withholds the security deposit or an accounting record with a bill for amounts exceeding the deposit longer than the timeline permitted by law, that property owner can be held liable to pay the tenant up to three times the amount of the deposit as a penalty.
In reality, security deposit issues are more complex than they seem. This is why rental property owners bank on the expertise of the professionals at Real Property Management TradeWinds. Our local Tampa property management professionals have a very good grasp of the laws in your state. They can help you handle not only your security deposit and rent in an ethical and legal manner but other interactions with your tenant as well. Would you like to learn more? Contact us online or call at 727-400-4722 today!
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