Managing a rental property involves various aspects, and the security deposit, often considered minor, is actually crucial. As a property owner in Manchester, it’s essential to know the regulations surrounding a tenant’s security deposit. Unlike rental payments, security deposits aren’t considered part of your investment income. There are particular rules you need to follow when handling security deposits, including accepting, depositing, and reimbursing them.
With this knowledge, you can make informed choices about the amount to charge and the legal use of the security deposit when the tenant moves out. We will go over the basics of security deposits in this article, providing you with the knowledge to handle them efficiently from start to finish.
How much should you charge for a security deposit?
Determining the security deposit amount is one of the key decisions for property owners before listing a rental. Since there might be limits on security deposits based on location, ensure you check state and local laws before deciding.
The standard security deposit amount is usually the same as one month’s rent, plus any cleaning or pet deposits. To ensure your rates are competitive, check what other landlords in your area are charging for security deposits. Excessive security deposits can turn away potential tenants.
Ethically handle security deposit funds
After receiving the security deposit, it’s important to know your state’s rules regarding where to store the funds. Certain states require landlords to keep the security deposit in a separate, interest-bearing account, while others offer more flexibility.
Despite the local rules, a key part of responsible property management is tracking the deposit’s location and not using the funds without a legal, documented reason.
Stay responsible with tenant security deposits
Landlords can keep and use a tenant’s security deposit in particular situations. The usual reason is to cover repair expenses for damage beyond what is considered normal wear and tear. This may involve repairing a broken appliance, addressing significant wall damage, or dealing with excessively stained carpet.
However, it’s crucial to understand that using security deposit funds for projects unrelated to tenant-caused damage beyond normal wear and tear is illegal. Adhering to these legal and ethical rules makes you a fair and responsible landlord.
Other reasons to ethically retain a tenant’s security deposit include cleaning costs, unpaid bills, and at times, a broken lease or nonpayment of 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
Once the tenant leaves, you have to decide on the amount of their security deposit to be returned. If all conditions of the lease are met, the landlord is responsible for returning the entire refundable security deposit. This refund often needs to be issued within a set period in many states, usually 30 days or under. Should you withhold any security deposit funds, an itemized list of the repairs paid for is essential.
Clearly communicating any withheld funds to your tenant, even if not required by your state, is a best practice to avoid misunderstandings or legal problems. Taking too long to return the security deposit or to provide an itemized bill for deductions can result in a penalty of up to three times the deposit amount.
Issues with security deposits can be more complex than they initially seem. The professionals at Real Property Management Thrive are trusted by Manchester rental property owners. Our local experts are well-versed in your state’s laws and can assist with managing security deposits, rent, and other tenant interactions ethically and legally. Contact us online or call 603-255-4100 today!
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