When you read over your lease, you will likely run across a section that discusses something called a “security deposit.” According to Wikipedia, a security deposit is “a sum of money held in trust either as an initial part-payment in a purchasing process, also known as an earnest payment, or else, in the course of a rental agreement to ensure the property owner against default by the tenant and for the cost of repair in relation to any damage explicitly specified in the lease and that did in fact occur.” Confused? Let’s break it down!
What does a security deposit do?
A security deposit is a certain amount of money that you pay to a landlord or rental company before moving into a rental house or apartment, and that may be returned to a tenant upon the end of the lease, provided that the tenant did what they promised to in their lease and there are no damages beyond usual wear and tear. In some states and municipalities, the landlord may be required to pay back the security deposit to the tenant with interest. The security deposit is designed to protect landlords from bad tenants. Basically, if a tenant leaves a property in bad condition, a landlord can opt to keep their security deposit, rather than returning it to the tenant, and use the money to cover the costs associated with getting the property ready to rent again.
For example, if a tenant had pets when the lease stated that they were not allowed to, and the pets destroyed the carpet in their rental home, the landlord would likely refuse to give the tenant back their security deposit, because the landlord would need the money to replace the carpet. Alternately, suppose that a tenant moved out of an apartment, and when the landlord inspected it, they found that there were numerous large holes in the walls. While some small tack holes or paint chipping may be acceptable wear and tear, large holes are considered excessive damages, thus, the landlord would keep the security deposit.
How much does the security deposit cost?
How much money the landlord will request for the security deposit depends on the rental, but the deposit is usually equal to one month’s rent. Thus, if you are renting an apartment for $800 per month, you will likely have a security deposit of $800 to move in. Usually, landlords ask that tenants pay the first month’s rent and the security deposit prior to move in, however, some landlords also require the last month’s rent, so the initial cost of move in can be 2-3 times what the monthly rent is.
Remember that in theory, the security deposit should cost you nothing. Assuming you keep your rental in good condition and abide by the terms of the lease, you should get your money back, so technically, you are really not paying anything. Rather, think of it like your money is going on vacation in somebody else’s bank account.
What is the benefit of security deposits?
For landlords and property managers, the benefit of security deposits is fairly clear – they protect them from bad tenants and damages bad tenants can cause. The security deposit is designed to motivate tenants to stick to their lease and keep their rental in good shape until they move out. If they don’t, landlords at least have peace of mind knowing that they can likely afford to cover the costs of the damages.
For tenants, however, the benefits of the security deposit are harder to find. Nevertheless, there are advantages to dishing out some money upfront, and getting it back later. Security deposits help ensure that landlords are not forced to raise rent to gain back the money they spent repairing the property after a bad tenant moved out. Thus, security deposits help ensure that rent prices stay relatively consistent, and don’t change just because a landlord or property manager had one bad experience with a tenant. Additionally, security deposits help landlords make repairs and additions as needed, so that new tenants don’t move into a house with a broken stove and dirty walls from the former occupant.
Want more information about renting? Visit our resources page, where we gather information for students, parents, landlords, and property managers related to off-campus living!
Recent Comments