Seattle Landlords Must Accept Payment Plans for Security Deposits

by Chris on December 19, 2016

Seattle’s City Council has passed a controversial new measure that will require landlords there to accept security deposits and other move-in fees — like last month’s rent — in installments.

The law will take effect in just under 30 days.

For a typical one-year lease, tenants must be allowed up to six months to pay. For shorter lease terms, tenants can request up to four months.

Despite protests, the new measure does not appear to provide any risk protection for landlords who now will be forced to hand over the keys without the incentive of a refundable security deposit to prevent damage to the unit.

In addition, the law caps total fees — including the security deposit — at no more than one-month’s rent. Landlords can charge for tenant screening reports, but only the precise amount used for that purpose.

While lawmakers say their intent is to protect low-income residents who are struggling in a very tight and expensive rental market, opponents say this law likely will have the opposite affect, as landlords become more and more stringent with credit requirements and raise rents to compensate for the increased risk of income loss.

Without the law, landlords would have had the flexibility to consider marginally-qualified applicants by adjusting the security deposit required or offering shorter-term leases. With these new provisions, landlords say they will be forced to be more vigilant than ever before when it comes to tenant screening, leaving the lesser-qualified applicants out in the cold.

The language of the ordinance itself refers to a security deposit as “money paid to the landlord by the tenant at the beginning of the tenancy as security for performance of the tenant’s obligations,” yet there is no remedy provided to the landlord if the tenant defaults or damages the property prior to paying the six installments.

Under the ordinance, partial payments made by the tenant must be applied first to rent. Landlords are specifically prohibited from charging interest or financing fees.

Lawmakers appear to rely upon the assumption that tenants who cannot come up with a security deposit and other fees are otherwise qualified tenants. An applicant who asks to pay in installments generally is viewed as a high-risk for landlords. It’s also a common trick employed of chronically bad tenants.

Violations of the ordinance can be costly, and may generate fines. In addition, tenants are allowed to sue in civil court and receive statutory penalties as well as attorneys fees.

In a last-minute amendment, owner-occupied single-family residences were exempted.

The new ordinance comes on the heels of another controversial measure, Seattle’s so-called “first come, first served rule.” Like the security deposit rule, critics say the first to apply rule likely will work against the vulnerable populations it was designed to protect — namely disabled and poor applicants. Those applicants may lack the resources and mobility needed to compete with those who have more reliable access to the internet, smartphones and cars.

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).

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Disclaimer: The information provided in this post in 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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