If you want to become a landlord and rent your property you need to know more about the security deposit. You need to know how to protect your right to the security deposit so you can avoid damage, broken leases and nonpayment.

You ask, what is a security deposit? A security deposit is a refundable deposit that a tenant pays to you as his/her landlord before the move into a property. Before the tenant leaves your rental property, the deposit should be returned to a tenant when their lease has expired. But, you should know in which situations, you can keep the security deposit.

If you want to be a landlord, first you should consider investing in your rental property and think about rental property software so you can have help with landlord dealing with different problems. When you are ready for renting, prepare an ad for renting and wait for your first or new tenant. So, read this reasons when and why you can keep a tenant’s security deposit.

When Can You Keep a Tenant’s Security Deposit?

First, you should know that every state has different laws regarding when you are legally allowed to keep a tenant’s security deposit. To protect your right to the security deposit you should check laws of the state, county, and city where your rental property is.

Reasons You Can Keep a Tenant’s Security Deposit

Early Termination of Lease

If a tenant breaks their lease, you as a landlord can keep the security deposit. So, you can cover the cost of earlier termination of the contract. But, it also depends on landlord-tenant laws in your state.

If you include earlier termination in the lease and the tenant signed they must comply with these conditions.

You may also be able to charge the tenant the court costs or attorney fees necessary if you have taken legal action against them.

Nonpayment of Rent

Most states and cities have laws which allow you to keep all of the security deposit if the tenant does not pay the rent. Nonpayment is a breach of the lease. You can keep the security deposit to cover the lost rent. So, this is one of the ways to protect your right to the security deposit.

Damage to the Property

Another reason you may be able to protect your right to the security deposit if tenant cause damage to your property. Damage is not same as normal wear and tear. Be aware of the difference.

Normal wear and tear:

• A few small nail holes in the walls from hanging pictures.
• Small stains on the carpet.
• A small amount of mildew forming in grout lines in the shower tiles.
• Dirty grout.
• Tarnish on bathroom fixtures.
• Loose handles or doors on kitchen or bathroom cabinets.

Damage includes:

• Multiple/large holes in the walls.
• Huge stains or holes in the carpet.
• Extensive water damage to hardwood floors.
• Missing outlet covers.
• Missing or damaged smoke or carbon monoxide detectors.
• Cracked kitchen or bathroom countertop.
• Broken bathroom vanity.
• Broken doors and windows.
• If the tenant doesn’t return keys at end of tenancy.

Cleaning Costs

In normal situations, you can’t keep the security deposit for cleaning. As a landlord, you need to clean your rental property before next tenant.

But, they are few situations when you can keep the security deposit.

For example, if the tenant leaves trash all over the apartment you may be able to keep a portion of the security deposit to cover your expenses.  Also, if a tenant pet used the carpet as a toilet. In this situation you can protect your right to the security deposit, so you can replace the carpet.

Money Owed to You for Utilities

You may be able to keep a tenant’s security deposit if the tenant did not pay any utilities which are required to pay as part of their lease.

Steps to take to help you protect your right to the security deposit

When you invest in real estate, as a landlord, you need to know steps to protect your right to the security deposit. You should follow your state, county, and city security deposit laws exactly. Otherwise, you may be forced to return the security deposit.

• Put it in Writing

All information about the security deposit should be written in your lease agreement. This should include:

• The amount of the security deposit
• The deposit is refundable if the tenant follows all terms of the lease
• Landlord should keep a tenant’s security deposit in case of damage or nonpayment of rent
• Take pictures of the property, inside and out, before the tenant moves in.

In this way, you will have sign and date of the condition of the property upon move in.

• Have a move-in walk-through with the tenant and have them sign a move in checklist.

When a tenant signs the pictures showing the condition of the property, you should walk the tenant through the property. You should show your tenant condition of the things. For example, you can turn on the stove or open and close the windows and flush the toilets.

The tenant should approve each item so he/she sign the form of agreement that the property is in good, habitable condition. Also, if there are some defects, they also should be noted.

• Put the tenant’s security deposit in an interest-bearing bank account – if your state allows that
• Notify the tenant in writing after they move in.
• Before the tenant moves out, give them a list of move-out procedures.

For example, this includes: removing all trash, returning the keys to you, leave the property broom swept clean etc.

• Take pictures of the property after the tenant moves out.

In this way, you could make a note of any damage to your property.

• Notify the tenant in writing after they move out

Send the tenant a letter with a number of days of their move-out. Write the right amount of security deposit that you return to the tenant. If you keep the security deposit you should explain reasons for doing that.

If the tenant doesn’t give you a forwarding address within 30 days of move-out, you may not be legally obligated to return the security deposit.

Just keep in mind, if you don’t follow the laws of your state, county, or city tenant may be able to take back the security deposit.