Although the security deposit is often viewed as a straightforward part of managing rentals, it carries considerable importance. For property owners in Troy, it is vital to comprehend the guidelines governing tenant security deposits. Unlike rental payments, a security deposit doesn’t form part of your investment income. You must adhere to certain guidelines when it comes to accepting, depositing, and refunding security deposits.
Being informed about these rules empowers you to decide on the amount to charge and the proper use of the security deposit after the tenant moves out. We will explore the fundamentals of security deposits in this article, giving you the information needed to manage them correctly from start to finish.
How much should you charge for a security deposit?
Rental property owners must decide on the security deposit amount before listing their property. Be aware of state and local laws regarding security deposit limits as they vary by location, and check them before setting an amount.
Most often, the security deposit is set at about one month’s rent, including additional deposits for cleaning or pets. To ensure your rates are competitive, check what other landlords in your area are charging for security deposits. Charging too high a security deposit can deter potential tenants.
Ethically handle security deposit funds
Knowing your state’s rules on where to keep the security deposit is crucial once you receive the funds. In some states, landlords must store the security deposit in an interest-bearing account, though others allow various options.
Regardless of your area’s laws, it’s crucial to meticulously document where the security deposit is held and not spend it without legal cause.
Stay responsible with tenant security deposits
Specific circumstances enable landlords to retain and utilize a tenant’s security deposit. The primary reason is to cover repair costs for damage beyond normal wear and tear. Such cases include a broken appliance, considerable wall damage, or heavily stained carpet.
Keep in mind that it’s illegal to use security deposit funds for unrelated projects if the damage isn’t due to tenants beyond normal wear and tear. By understanding and adhering to these guidelines, you will be a fair and responsible landlord.
Other legitimate reasons to retain a tenant’s security deposit are cleaning costs, unpaid bills, and sometimes a broken lease or unpaid rent. Yet, some states don’t allow landlords to use security deposit funds for unpaid fines or late fees, so it’s essential to know your local regulations.
Refund security deposits to tenants
When your tenant moves out, you must decide how much of their security deposit to refund. If the lease terms are satisfied, the landlord must return the full refundable amount of the security deposit. Many states require this refund to be issued within a certain timeframe, generally 30 days or less. If you intend to keep part of the security deposit, it’s crucial to provide an itemized list of the repairs covered by the funds.
Even if not required by state law, it’s a best practice in property management to clearly communicate any withheld funds to your tenant to prevent misunderstandings or legal disputes. Property owners who delay returning the security deposit or giving an itemized bill for deductions may face a penalty of up to three times the deposit amount.
Handling security deposits can be more complicated than it seems at first. Rental property owners in Troy turn to the professionals at Real Property Management Metro Detroit for their expertise. Our property management professionals have a thorough understanding of your state’s laws and can assist in handling security deposits, rent, and tenant interactions ethically and legally. Contact us online or call 248-808-6550 today!
Originally Published on June 18, 2021
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