One detail of managing a rental property that appears to be really simple is the security deposit. But actually, there are numerous things that Salt Lake City property owners need to grasp well to handle a tenant’s security deposit correctly. Unlike a rental payment, a security deposit is not part of your investment income. But the reality is, there are laws that you have to meet to accept, deposit, and reimburse security deposit funds legally. You will likewise need to perceive how much to charge and what you can legally and ethically use the security deposit to pay for once the tenant moves out. In this article, we’ll look into the basics of security deposits so that you can handle them appropriately, from start to finish.
Determining How Much to Charge
One of the significant decisions that rental property owners need to make before advertising your rental for the first time is how much to ask for in a security deposit. You will be stunned to find out that in many states, there is no fixed amount; it is commonly left up to the landlord to decide. Although, there may be limits to how much you can charge, so you should closely consider your state and local laws in advance of giving a number. The most typical amount asked of tenants is a sum that is around the same as one month’s rent, plus perhaps a cleaning deposit or pet deposit, if applicable. It’s an excellent idea to do quite a bit of research on what other landlords in your area are charging in order to effectively make your rental rates competitive. Asking a great deal for a security deposit could drive potential tenants away.
Handling Security Deposit Funds
If you have the security deposit funds in hand, you’ll need to know the regulations in your state about where to keep them. Some states require landlords to keep the security deposit in a separate, interest-bearing bank account. But certainly, others bestow landlords a range of options of where to keep the funds. Even so, it doesn’t matter where you live, you should keep careful records that note where the funds are held and pay attention not to spend them until you have a legal, documented reason to do just that.
When You Can (Legally) Keep Security Deposit Funds
There are particular valid situations that let a few landlords keep and use a tenant’s security deposit funds. The most known is to pay for repairs for damage to the property beyond normal wear and tear. As an instance, a broken appliance, big holes in the walls, or excessively stained carpet may all be ethical reasons to keep a tenant’s security deposit. But if in case, that carpet is more than seven years old and you would have replaced it for your next tenant anyway, it is illegal to withhold security deposit funds to pay for the replacement.
Several other ethical reasons to keep some or all of a tenant’s security deposit include cleaning costs, unpaid bills, and in some cases, a broken lease or nonpayment of rent. But, on the other hand, some states do not allow landlords to withhold security deposit funds to cover unpaid fines or late fees, and so again, make sure to understand the regulations in your location.
Security Deposit Refunds
At any moment your tenant moves out, you will need to determine how much of their security deposit will be refunded. If the terms of the lease have been met in full, the landlord’s responsibility is to return the entire refundable amount of the security deposit to the tenant. This refund must be sent out within a sure timeframe in many states, usually within 30 days or less. If you opt to withhold any portion of the security deposit, it is important to include an itemized list of the repairs that were paid for with the funds.
Even while your state doesn’t require it, among the best practices of rental property management are to provide clear communication of any funds withheld to your tenant to avoid misunderstandings or, worse, legal action. Moreover, if a property owner withholds the security deposit or an accounting record with a bill for amounts due above and beyond the deposit, longer than the amount of time prescribed by law; that property owner may have to pay the tenant up to three times the amount of the deposit as a penalty.
As you can definitely see, security deposit issues can be a much more complicated issue than they first appear. This is why various rental property owners rely on the expertise of the professionals at Real Property Management Wasatch. Our local Salt Lake City property management professionals have full knowledge of the laws in your state. They can help guarantee that you handle your security deposit, rent, and other interactions with your tenant in an ethical, legal manner. Would you like to learn more? Contact us online or call at 801-889-1517 today!
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