We all know that security deposits reduce the likelihood of your rental unit becoming damaged. What you might not realize, is that there’s a right and wrong way to handle them. If you aren’t careful, you might even run into legal issues.
Every state has laws regarding security deposits. You need to make sure you’re aware of these laws so that you don’t get into legal trouble. For example, many states require landlords to deposit security deposits into a designated bank account. Specifically, one that’s interest-bearing.
Each state also has laws regarding how much time you have to return the deposit upon move-out or provide information for why you’re not returning all of it. The laws may also dictate the amount of money you’re able to require for a security deposit. And they address whether you can or can’t hold a security deposit for missed rent payments. As an aside, it’s important to remember that security deposits aren’t for regular wear and tear. They’re only to be used if the tenant causes property damage.
Before having new tenants sign a lease, make sure to take pictures or videos of how the property looks before move-in. When you meet with the tenant to have the lease signed, be sure the lease covers how much the security deposit is and when it’s required. Once the lease is signed, the tenant should pay you the security deposit. This should be a separate payment from rent, so you can easily put it in a separate account. After the security deposit is paid, you can provide the keys to the rental.
Before your tenants move out, inspect the property. You may even want to do a walk-through of the property with the tenants, and have them point out anything that’s damaged or broken. Either way, make a list that includes the damage you found and the cost of repairs. If you provide this information before move out, your tenant may be able to make the repairs on their own beforehand.
These are just a few tips to help you handle security deposits successfully. If you’d like additional help managing your property, please reach out to us at PMI: https://www.memphispropertymanagementinc.com/.