3 Things Tenants Don’t Understand About Security Deposits

by Chris on July 31, 2017

Unfortunately, security deposits disputes are a common occurrence. One of the reasons for this is that too many tenants fail to understand how deposits work.

For instance:

A security deposit is not last month’s rent.

Some tenants believe they don’t owe rent for the last month of the lease so long as they’ve “prepaid” with a security deposit. Perhaps this common misconception occurs because many states cap the security deposit at no greater than one month’s rent, or maybe the tenant did not understand the lease agreement. Others may be trying to sneak out of the property before the landlord discovers damage.

Educating tenants on their obligations to pay rent every month, including the last month, in an important step in preventing a tenant dispute. The lease should provide that the security deposit will not be returned until the tenant has moved out and the landlord has evaluated the condition of the property.

Another helpful strategy is to sign up to Report Rent Payments through TVS. That information will be shared with TransUnion, and will appear on the tenant’s credit report. That’s a good way to keep tenants honest when it comes to misapplying the security deposit funds.

A security deposit is not divisible for roommates.

Many tenants fail to understand the nature of roommate rentals. This is particularly true to first-time renters, who commonly share the unit with other people. Common misconceptions include:

An individual only will be accountable for damage they cause, not the roommates;
If the person moves out, they simply can leave or find a replacement roommate, and the lease is not affected;
An exiting tenant is entitled to their portion of the deposit back when they leave; and
The proportionate share of the security deposit will be provided to each individual tenant.

In reality, the roommates are jointly and severally liable, so the landlord need not be concerned with how the roommates plan to divvy up the deposit. With roommate rentals in particular, it is crucially important that the lease contain the proper language for multiple tenants, that each roommate is a party to the lease, and that the roommates each understand their rights and responsibilities.

Security deposits are meant to be refundable.

Some tenants are skeptical that they’ll get their deposit back. Maybe the tenant was treated unfairly in the past, or maybe they don’t care for properties well enough to get the deposit back. Either way, this is a problem for a landlord. ┬áThe tenant is far less likely to care for the property, and ultimately, it’s the landlord who will suffer most.

A landlord will never profit from collecting a deposit. It is highly unlikely that the  deposit will be enough to cover extensive property damage. It is not uncommon for losses to exceed ten times the amount of the deposit. The only purpose of a security deposit is to serve as an incentive for the tenant to care for the property.

That will happen only if the tenant believes they’ll get the money back. Avoid words or actions that undermine the incentive. Instead, show tenants what they need to do in order to get their full deposit returned:

Explain how to report damage or repairs during the course of the lease, and respond in a professional manner to resolve the problem and build trust;
Provide move-out guidance like a cleaning checklist when the tenants move in, and again about a month before move-out;
Inspect the property throughout the lease term so any minor damage does not become extensive; and
Make sure the tenant knows where to toss trash and dispose of or donate larger items.

Security deposit deductions work to some degree, but the better case scenario for a landlord is a unit that is returned in good condition. It is in the landlord’s best interest to be able to return the entire security deposit with no deductions. It doesn’t hurt to let tenants know that.

This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).

Click Here to Receive Landlord Credit Reports.

Disclaimer: The information provided in this post is not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.

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