Landlord’s Guide to Security Deposits: What You Need to Know

When you rent out your home to someone, they will often pay a security deposit. Security deposits are a necessary part of renting out property. They are designed to protect landlords from damages that may occur. But what are the limits? Your landlord’s guide to security deposits will teach you what to do in these situations and more. Read on for everything you need to know about security deposits!

What is a Security Deposit?

A security deposit is a sum of money that tenants pay to the landlord upon moving in. If all goes well, it can be returned at the end of the tenancy. Security deposits are used as a way for landlords to protect themselves from damages or, in some states, unpaid rent. A solid tenant screening process will do a lot to protect your investment, but it can’t predict everything. A single missed paycheck can result in unpaid rent or damage could occur beyond normal wear and tear. Not being prepared for it can prove costly! It’s better to have something secured than nothing at all!

The Tenant’s Responsibilities

Tenants have responsibilities when it comes to renting property. They must pay rent on time and maintain the property. If they don’t take care of the property or pay their rent, the landlord can do certain things to make sure they get your money back. For example, if the tenant doesn’t take care of the property or pay the rent (in some states), you can:

  • Take legal action against the tenant
  • Put their name on a credit bureau list
  • Keep their security deposit

If your tenant breaks any agreement with you, you are allowed to do any or all of these things. 

What To Do If a Tenant Breaks Your Rules

We all know that when renting out a property, you need to prepare for the worst. If your tenant breaks your rules, there are a few steps you can take in order to protect yourself and your home.

If your tenant damages something like the dishwasher or bathroom, it’s important to keep detailed records of what was damaged and how much it cost to replace. This will help you if it comes time to evict the tenant. This also helps with backing up your decision to withhold part or all of the security deposit as a result of the damage the tenant caused.

If a tenant becomes problematic enough to warrant eviction, you’ll want to consult with an attorney to find out what steps you need to take to evict them legally and as quickly as possible. If you skip any steps or don’t handle the eviction completely legally, you can give the tenant the ability to stay longer and cost you more money.

What To Do If the Tenant Damages Your Property

The tenant will often be liable for any damages to the property – unless they have renter’s insurance. This is why it is important to make sure your security deposit covers the cost of these damages. Of course, it’s not always easy to predict if damage will occur or how much it will cost to repair. That’s why you need to take these precautions before renting out your property:

  • Make an agreement with the tenant about cleaning up after themselves and the process for any repairs that are needed
  • Take photos of everything before they move in and agree on what needs to be fixed before they move in
  • Get a signed agreement/contract with the tenant that states exactly what furniture, appliances, and other items are included in the rental agreement and what condition they are in – this will eliminate confusion over wear and tear or damage caused by tenants later down the road

Once you do these things, you should be in a position to easily determine whether the tenant gets their security deposit back and if they cause damage, how much of the security deposit to withhold for repairs.

When the tenant leaves, you should also take these steps:

  • Do a walk-through with the tenant to assess the status of the rental property
  • Take photos of everything and document specific instances of damage
  • Provide tenant with a detailed list of the damage caused and what it will cost to repair

When you take these steps, you ensure that the tenant understands why you are withholding part or all of their security deposit, if necessary. You also provide them with documentation in the event that they try to sue you for the security deposit, setting yourself up for a stronger court case.

How To Calculate A Security Deposit

A security deposit is often a certain number of months’ rent – typically one or two months. But how much you can charge is based on where you live. You need to familiarize yourself with the laws in your area. You’ll also need to look at the market itself. If other landlords are charging just one months’ rent, it’s going to be difficult for you to charge two or three months’ and find tenants. 

Security deposits are a landlord’s best friend. A security deposit is a small amount of money that a tenant pays to the landlord, in addition to monthly rent, in order to use the property as their home. The deposit is used to cover any damages that the tenant may cause to the property, or if they stop paying rent, which means the landlord won’t have to go through any legal proceedings to get their money back. It’s important that you know your rights and responsibilities as a landlord so you can avoid any conflicts and go about your business as usual.

6 Tips on How to Handle Tenant Conflict

No matter how carefully you screen your tenants, landlords will inevitably experience tenant conflict. From parking issues to loud music and common area conflicts, tenants can get into a confrontation for many reasons. Conflicts can have an negative effect on your property and even cause other tenants to move out. 

Learning how to handle conflict on your property can go a long way. Here are six ways to deal with conflict between tenants:       

Set rules that will prevent tenant conflict from arising

Handling tenant conflict on your property should begin with establishing a residential lease agreement that outlines your expectations from tenants. Ideally, it should highlight rules on what constitutes undesirable behaviors and how to avoid them. This can include rules regarding how to use shared spaces, noise, pets, and controversial issues like smoking. 

When a new tenant moves into the property, give them a copy of the agreement. Emphasize the rules and inform them that all complaints should be solved through relevant authorities and not between tenants. 

Have a policy on how to handle every complaint

Establishing rules on how to handle specific cases so you can remain consistent. That will protect you from approaching similar cases differently. Simple violations like noise can be dealt with less severely, while more severe violations can attract more severe punishment. 

Your policy should also include how tenants should file complaints. This could be through filling out forms online or physically. Your tenants should be aware of how to go about the process for smooth handling of a dispute. 

Keep a written record 

Keeping a written record of every conflict is important for solving any disputes that might develop in the future. In any case, if a tenant repeats the same mistake over and over again, you will have grounds to evict them without opposition or involving the courts. Your written document should have the following fields: 

  • Date of the complaint
  • Nature of the dispute
  • Tenant’s name and unit number
  • Date the complaint was resolved
  • Resolution

A written record essentially allows you to follow up on the agreement made and if there is a need to take further measures. 

Know your rights under the lease

Besides policies on how to handle tenant conflict, the lease also includes your rights and responsibilities as a landlord, and being up to speed with them allows you to protect yourself in case of disputes. Specifically, these rights help you to correct tenant behavior in accordance with the property agreement and local and state laws. 

It is advisable to consult a legal professional knowledgeable in tenant issues. This helps to avoid legal complications that may arise. 

Update both complainee and complainant  

Be sure to let the complainee know that a case was lodged against him, but don’t disclose the tenant who raised the issue. This is to avoid tension and resentment that could further escalate the problem. Moreover, give a detailed account of the complaint as well as actions to be taken if the tenant is found guilty. 

Make sure you conduct your own research to get the facts together. Don’t forget to issue every party a written document about the case and how it will be resolved. 

Consider mediation 

Mediation is a viable way to solve tenant disputes to ensure the problem at hand does not ruin the relationship between them. In some cases, you can play the role of a mediator, while in others, you might want to involve a professional mediator, especially if the case is rather technical. A mediator will help to come up with an amicable solution for the benefit of the landlord as well as the tenants in question. 

Summary 

While disputes are sometimes inevitable, there are several ways you can prevent them to ensure all tenants are living in peace and harmony. Having rules and policies in place is a sure way to avoid conflicts among tenants to keep your property safe for all. 

What responsibilities do you have when it comes to snow and ice at your rental property?

Throughout the winter season, snow and ice are common problems across many states. Even if clearing the streets is generally the responsibility of the municipality, there are often local guidelines mandating swift removal of snow and salting icy areas on sidewalks and other pathways to reduce the risk of accidents.

Property considerations

If your rental property is an apartment or multi-housing unit, you are likely responsible for clearing snow and ice in common areas such as stairs and walkways.

When it comes to a single-family property, the guidelines are less clear and vary between states and even cities within the same state. In some cases, the city or neighborhood clears ice and snow from the sidewalks. In others, this is the responsibility of the property owner.

In all cases, it’s important to do so as quickly as possible as liability for falls and injuries is a real risk. 

Lease language

To ensure that both the tenant and the landlord are clear on who is responsible for what, there are some key clauses to include in the lease, including but not limited to:

  • Who is in charge of snow removal and ice mitigation
  • Where the snow should be removed from
  • Where the snow should be moved to
  • How quickly the snow should be removed; this will vary by city so be sure to check with your local city government.
  • If your tenant is tasked with the responsibility, if you choose to provide snow clearing equipment or if tenants should provide their own

It should also be noted that liability may fall on you regardless of what is stated in the lease. Always be sure to check both state and local laws to ensure that your lease aligns with legal guidelines.

Winter maintenance

Cold weather, regardless of snow, can cause damage if not handled properly.

Before temperatures really dip, it is a good idea to visit the property and check on key systems and equipment such as the heating, water pipes, smoke alarms, and carbon monoxide detectors. Ensuring that all equipment is in good working order before the season gets underway can reduce the risk of failures and early-morning emergencies.

You should also regularly check the seals on external doors and windows to ensure they are being maintained properly and are in good condition. Not only can old or broken seals damage the property if water and ice get in, but it can also impact the overall temperature of the property and put a strain on heating systems. 

In addition to your regular maintenance, you may wish to discuss ways in which your tenants can look after the property during the colder months such as best practices for using the heating system or how to avoid frozen pipes.

Remember, always check your local laws and ensure that you are following them. In addition to legal requirements, helping your tenants maintain the property throughout the winter months may reduce the risk of long-term damage.

Best Ways to Research New and Updated Local Landlord-Tenant Laws

As a landlord, it’s important that you stay up to date on the laws that impact you, your property, and your tenants. However, unless you are also a legal expert, it can be challenging to keep track of every landlord-tenant law and a consultation with a lawyer can get expensive.

Because each state and even each city has its own laws, you need to know where to look. While search engines are a useful tool, it’s important to understand which sources you can trust and where to find the most up to date information.

When researching local issues, keep in mind that while federal and state laws take precedence, local landlord-tenant laws adds an additional layer of regulation to further protect the municipality. Because of this, it’s usually best to start at the federal level and work your way to local. 

Federal Law

The U.S Department of Housing and Urban Development (HUD) is a primary resource for landlord-tenant laws. You can use the search function on their home page or Google “your search term + HUD” to find information specific to your question.

Reviewing previous cases online can also be useful. The Legal Information Institute from Cornell University Law School interprets the law and specific cases by state or through various federal courts. The U.S. Code via Cornell University Law School provides helpful information on current statutes.

State Law

Once you have consulted federal laws, it’s time to move to state landlord-tenant laws.  This will govern most of the issues you’ll encounter regarding landlord and tenant rights.

  • First, check with your state attorney’s general website, which often includes basic information relating to landlord and tenant laws.
  • You can also visit the HUD website; under the “State Info” tab, you can select your state. Under “Get Rental Help,” you’ll find information about tenants’ rights and laws. This section deals with laws specific to that state and provides a list of tenants’ rights and landlords’ responsibilities.
  • Visit USA.gov for information about complaints with housing. While this site primarily offers tenant resources, there are some useful to landlords as well. The Fair Housing Act details many regulations for rental properties, especially in the area of discrimination. However, many states further define discrimination beyond this act, which is why you will also want to refer to the state statutes.

Local Laws Regarding Landlords and Tenants

Cities and municipalities often provide their own regulations and the best source will be through the city’s website. You can also contact a city office or the local library for more information. The local level is where you’ll find ordinances about noise or trash, public nuisances, and other regulations.

If your rental property is in a suburb or neighborhood association, you’ll have to also check with them for further guidelines. Some associations have bylaws on issues such as landscaping, outdoor decorations, and parking. These associations have regular meetings and officers. Bylaws don’t supersede city or state laws, but they often deal with specific aspects of rental properties, including where rental properties are allowed.

Other useful sources of information

Additional resources we reference: 

Conclusion

Understanding local law governing landlords and tenants begins with federal law and continues through to the local level and even down to an association level in some cases.

Following these laws as you manage your properties and tenants is essential and, as such, being able to find up to date information is crucial. Remember, when a question or concern arises, even if you have dealt with it before, you should check for any recent legal changes.

The State of the Housing Market

In 2020, despite the global pandemic, the number of home sales increased significantly and the housing market continued to boom throughout 2021. The nationwide nominal house price index is now 40% above its 2012 low-point and 4% above the peak reached in 2006.

Let’s take a closer look at the current state of the housing market in key regions.

New York and New Jersey

If you’re considering purchasing a property in the tri-state area, you’d better be ready to deal with a very competitive market. With demand rising and available properties in short supply, New York’s thriving real estate market showed no signs of slowing in the third quarter of 2021. Despite 18 months of rising property prices in New York state, prices remain lower than they were before the pandemic hit. The average rental price in Manhattan increased 8.3% between September 2020 and September 2021; in Brooklyn it dropped 5.8% and in Northwest Queens, it increased 1.7%

Mid-Atlantic Region

Those of you considering a property investment on the East Coast may wish to look at the mid-Atlantic region, from New Jersey to Virginia. Building permits are on the rise across the region with permits for new, single-family homes increasing by 32-50% during the first half of 2021.If you’re looking to set up a rental property, it’s best to examine the area on a city-by-city basis to ensure you can tap into a market willing to pay a profitable rental rate. Philadelphia hit a record high for apartment occupancy, with August of 2021 seeing a two-decade peak of 97.6%. Virginia Beach has also seen a steady increase with August 2021 seeing occupancy rates of 98.1%.

Southwest

The housing market in the Southwest has seen property prices skyrocket with Utah and Idaho witnessing the highest price increases nationwide. Rental prices have increased significantly with high demand, yet low availability of vacant rental properties pushing rent prices up even further. More people working from home during the pandemic translated to more people looking for spacious properties in the suburbs, and 2021 saw buyers frantically purchasing property in Texas where housing prices are over 30% higher statewide than a year ago. But, according to a research economist for the Texas Real Estate Research Center at Texas A&M University, the buying frenzy is over. 

Pacific

The white-hot Seattle-area housing market has started to cool with fewer properties being listed and prices dipping, though the market is still very competitive. Affordability is a big issue and The California Association of Realtors expects home prices to rise by 5.2% next year and housing affordability to drop. While national rent growth is still going up from 11% to 13%, it’s lagging considerably in California.

Overall, 2021 closed with mortgage rates at a record low, a strengthening job market on the horizon, and rents surging.

Safety Options for Rental Properties

Your rental property is an investment. There are a few subtle ways to protect this investment, such as getting homeowner’s insurance. However, it’s also important to think about more direct safety options for your rental properties to protect them from burglars and vandals.

Here are three options for protecting your properties and your tenants:

Alarm Systems


Alarm systems use sensors and codes to protect your buildings.

The sensors will alert the authorities when a door is opened or a window is broken.

Codes entered onto keypads can change alarm settings and turn the alarm on and off as your tenants come and go.

Sensors


The sensors included in alarm systems must be installed.

This cost of installation can vary significantly depending on the type and number of sensors used. Some sensors can only measure when a window or door has been opened, whether by a tenant or an intruder.

These less expensive sensors throughout the home won’t alert tenants to dangers such as carbon monoxide, fire, flood, or broken windows.

The more expensive sensors can detect significant risks to your tenants and property. They can also alert your tenants when there is motion detected in the home. For example, someone may sneak into a home while the alarm isn’t armed. They then may hide until the tenants are asleep. The intruder may even watch from their hiding place as someone enters the code to disarm the alarm so that they’ll be able to disarm it before they start stealing valuables. They can them disarm the system, take valuables out of the home, and rearm the system. This scenario is possible for a system without motion detectors. However, with motion detectors, as soon as they intruder began to move from their hiding place, the sensors would trip, the alarms would sound, and the tenants would be alerted.

Gated Entry


Another option for tenant and property safety is gated entry.

This entails having a strong gate constructed all around the property line with just a few entry points (for instance, one in the front, one in the back, and one on the side), for tenants to use. The tenants would need a key card or gate code to gain entry onto the property.

The Gate


The gate you choose would need to be high enough so that no one could jump or climb over it. Yet, you’ll want to monitor the height, because costs of installing the gate increase as the height goes up.

Also, for aesthetic purposes, gates that are very high tend to make residential properties look like prisons, and this may turn off potential (or even current) tenants.

Video Surveillance


Criminals may be less likely to steal from or damage your property if there are cameras visible on the land. If they understand there is a greater risk that they will be captured because they are being videotaped, they are less likely to take the risk of getting caught.

Playback and Monitoring


You may not need to have a specific security professional viewing the security cameras of a single-family home throughout every hour of the day. There are ways to digitally record and store various amounts of video so that you have it on file and can play it back to see who spray-painted a garage door or stole a laptop from a home. Since most people notice an act of vandalism or theft has taken place soon after it happens, you may opt to store video that covers a limited date range.

Based on the property you’re protecting, its neighborhood, and your budget, use this information to make a decision about the best single-family unit security options for your rental situation.

Keeping your property safe protects the longevity and the value of the land and structure that you have invested in.

3 Dangers of Unscreened Tenants

Even if you screen every tenant that you accept into your rental property, there are other ways that unscreened tenants may end up living there. Your tenant might let a down-on-their-luck friend couch-surf while they get back on their feet. They may be caught up in a whirlwind romance that has their significant other staying at the property more often than not. Whatever the situation is, it can complicate things.

A guest staying beyond the reasonable time span you define in the lease agreement is essentially an unscreened tenant on your property.

You might not think it’s the biggest deal in the world, but there are some very real dangers unscreened tenants bring to your property.

1. Unknown background


You don’t know anything about the person who is living in your property.

When you bring a tenant onto the lease agreement, you probably check their credit and criminal background to ensure they can afford the property and they won’t use it for illegal activities. You don’t have that reassurance with a friend or family member that the tenant brings into your property. The tenant may assume that their friend or family member is trustworthy, but some people are very good at hiding bad behavior to get what they want.

You don’t want to kick out a good tenant because they won’t get rid of an unscreened visitor who stays past the lease agreement terms. You also don’t want to risk your property becoming involved in illegal activity. If the original tenant is interested in the guest staying on a long term basis, talk to them about screening the new addition to the apartment. They need to go through the same screening process the original tenant does to ensure everything is on the up and up. You don’t necessarily need to add them to the lease, depending on the situation, but you do want to do your due diligence to protect your property.

2. No security investment in the property

The unscreened tenant doesn’t have anything tying them to the property except the tenant that is on the lease. They don’t have a monetary investment, so they don’t have a direct incentive to keep up on maintenance and cleanliness. If they are staying for a significant amount of time, they add to the wear and tear of the property. They also run the risk of damaging the property, whether through negligence or malice.

3. No consequence for disruptive behavior

Your unscreened tenant also doesn’t deal with any consequences for acting disruptively. They aren’t the ones who stand to lose their apartment when they get into arguments on the front porch, hold loud parties, or ignore noise complaints coming from the next door neighbors. That’s all on the on lease tenant, who may not realize just how badly the unscreened tenant is behaving.

Avoiding Unscreened Tenants

You have no way to stop unscreened tenants from getting onto your property. After all, you can’t prevent your tenant from having guests.

What you can do, however, is restrict exactly how long the tenant’s guests can stay before they need to leave the property.

If you aren’t often at the apartment, you won’t necessarily know there’s an unscreened tenant on the property unless neighbors complain. However, it’s important to get this policy in writing so that you can enforce it. If the original tenant refuses to adhere to the lease terms, you have grounds to remove them from your property before a serious situation occurs.

How to Legally Tackle Skipping Tenants

Dealing with tenants who skip out on their lease can be a very frustrating endeavor; however, there are some steps that a landlord can take to recover the money that is owed to them. As a landlord, you have a right to collect money that is owed to you when a tenant leaves the rented property prematurely. A lease agreement with fixed terms protects you from tenants who skip out on their remaining rent. They owe you the rent on that lease for the duration of the lease period or until you are able to rent out the property–whichever comes first. It does not matter whether the tenant gave you notice or they vacated the property in secret; the process of collection is the same.

Create a Documentation File


It is paramount that you keep written documentation of communication between you and the tenant. If the tenant provided you with written notice that they were breaking their lease agreement, include that letter in their file. If the tenant did not provide notice but left in secret, simply type up a short note that explains when you discovered that the property had been vacated.
To achieve the best results, stay organized and detailed in the records that you keep throughout the process. Be sure to record dates, times, and phone numbers associated with any conversations that you have with the tenants. You will need all of this information when you attend the court hearing.

Send a Written Notice to the Skipping Tenant


Send a written notice to the tenant to remind them that they are responsible for paying the rent until the end of the lease or until you find another tenant. Be sure that the notice you send clarifies that they must pay the rent on time in accordance with the lease agreement. The notice should also include clarification that you will pursue legal action if the rent is not paid as required under the lease.

Inspect the Property


When a tenant provides notice that they are leaving before the end of the lease, inspect the condition of the property as soon as possible. Complete an inspection checklist and note any damage that has been caused by the tenant. You will also need to take pictures of damaged items, but normal wear and tear should be excluded from your list.

Prepare the Property


Make the necessary preparations to lease the property again. Once it’s ready for rental, begin advertising and interviewing potential tenants. You will also need to keep copies of any ads you post and the receipts and costs associated with those ads. You should place this information in the file with your other documentation.

Notify the Original Tenant of the Total Amount Owed


Once you have rented the place or the lease has expired, you will need to send the tenant a notice of the total amount owed. Make sure that you have identified a deadline by which the money must be paid. Let them know if the money is not paid by that time, you will be forced to file a civil suit for the purpose of collecting the money that is owed to you.

If you don’t receive the money by the deadline, you will need to visit the county clerk’s office to file the suit and have a hearing date set. On the date of the hearing, take all of your documentation with you. Once you present it to a judge or justice of the peace, it should be a quick judgment. Not only will you recoup the money for the lost rent, but the judge will most likely make the tenant cover your court costs as well.

Minimizing the Damage Done to Your Property

Normal wear and tear on a unit is… well, normal.

Depending on how long the tenant lives within your house or apartment unit, you’ll see wear on carpets, on walls, and on appliances.

This is all just a part of life in a person’s home, but there are certain things you can do to minimize the damage even before you choose your tenant.

This will help when it’s time to turn the property over.

The shorter the turn around period, the better your income.

There are many ways to protect your property, but protecting for beyond-normal wear and tear (even if it’s not done maliciously) begins during the advertising/screening process.

While certain groups are protected by law that does not mean that you cannot be picky over your next renters.

You can’t market your rental to ‘singles’ or ‘families without children’, of course, but you can make other choices that will help keep your property in better shape.

Smokers

Smokers are not currently a protected class. Indoor smoking can cause damage the the paint on the walls and to the carpets and make it difficult to eradicate the smell even after the tenant has moved out.

You may be required to paint over nicotine stained walls and do a deeper clean on the unit than you would have with a non smoker.

Many landlords are marketing their properties as ‘smoke free’ now.

Smoking will be prohibited inside these units, and you may choose to only accept applicants who do not smoke at all.

This will also help with renting the property again when it becomes time, as the new applicants see that your property is smoke free and they don’t have to worry about lingering smells.

Pets

Unless the applicant is requesting to keep a service animal, a pet is not a protected class.

You’ll want to put some thought into how you want to approach pets, though, because while they’re not protected many renters do own them and you may risk cutting off a significant number of potentially excellent applicants from your pool to choose from.

Though some landlords prefer to keep pets out of their property entirely, some choose instead to limit the breed, size, and number of the pets they allow in.

Meeting the pet is also an option you may choose to entertain as well. You can tell a great deal about the animal from the meeting, such as how well they behave and listen to the owner. You may also choose to charge a pet deposit and/or pet rent to cover any potential costs associated to the clean up.

Irresponsible Tenants

This one is going to be a bit harder to detect, and you won’t always be able to pinpoint it.

There’s a difference in people who live with a bit of disorganization and those that simply do not take care of the property.

When a tenant signs a lease with you they are agreeing to take care of the property as their own.

They are meant to keep it clean and maintained.

There are a couple things you can do to try to catch tenants that might cause real damage to the property before you ever sign the lease with them.

The first is to meet them in person.

Sit down with them, talk, and discuss what they’re looking for.

This won’t always give you a clear view of their habits, but it might.

You may also wish to follow up with their prior landlords.

Check and see how they left the last two or three properties that they lived at.

Were they left in the same condition as received, save the wear and tear? If so, then there’s a better chance they’ll take care of your property as well.

Regular Property Inspections

Granted, this won’t help you catch the problem before you sign the lease, but may help save you money before a small problem grows into a big one.

Make sure to abide by your local laws and give your tenant the appropriate amount of warning before dropping by so that you don’t encroach on their personal space.

You should be able to see any signs if they’re not living up to their end of the lease or if there’s a small maintenance issue that could do real damage if left unattended.

In the end these inspections help both you and your tenant so that the home is safe and secure.