Often thought of as a simple task, handling the security deposit is a vital part of rental property management. As a property owner in Salt Lake City, it’s essential to know the regulations surrounding a tenant’s security deposit. Security deposits are distinct from rental payments because they are not part of your investment income. Specific regulations must be followed for accepting, depositing, and returning security deposits.
Knowing these guidelines enables you to determine the right amount to charge and the legal and ethical use of the security deposit after tenant departure. In this article, we will discuss the essentials of security deposits, preparing you to handle them properly from start to finish.
How much should you charge for a security deposit?
Before advertising a rental property, owners must decide how much to charge for the security deposit. Your location may impose limits on security deposit amounts, so review state and local laws carefully before setting a figure.
Typically, tenants are asked for a security deposit equivalent to one month’s rent, plus a cleaning or pet deposit. To stay competitive, research the security deposit amounts charged by other landlords in your area. Overcharging for a security deposit could repel prospective tenants.
Ethically handle security deposit funds
When you have the security deposit, understanding your state’s regulations on where to keep it is essential. Some states stipulate that landlords must place the security deposit in an interest-bearing account, whereas others have different requirements.
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 are permitted to retain and use a tenant’s security deposit under specific conditions. The usual reason is to cover repair expenses for damage beyond what is considered normal wear and tear. This might involve fixing a broken appliance, repairing major wall damage, or cleaning heavily stained carpet.
It’s important to remember that it is illegal to use security deposit funds for projects not related to tenant-caused damage beyond normal wear and tear. Being aware of and complying with these guidelines will make you a responsible and fair landlord.
Ethical reasons for retaining a tenant’s security deposit can include cleaning costs, unpaid bills, and in some instances, a broken lease or unpaid rent. Still, certain states forbid landlords from retaining security deposit funds for unpaid fines or late fees, so always verify your local regulations.
Refund security deposits to tenants
After a tenant moves out, you must determine the amount of their security deposit to be refunded. If all lease terms are fulfilled, the landlord must return the full refundable security deposit to the tenant. In numerous states, the refund must be given within a specific period, typically 30 days or fewer. If you decide to withhold part of the security deposit, including an itemized list of repairs funded by the deposit is necessary.
To avoid misunderstandings or legal actions, clearly communicate any withheld funds to your tenant, even if your state doesn’t mandate it. Delays in returning the security deposit or providing an itemized bill for deductions may result in a penalty of up to three times the deposit amount.
Issues with security deposits can be more complex than they initially seem. Salt Lake City rental property owners count on the expertise of Real Property Management Wasatch professionals. With in-depth knowledge of state laws, our local property management professionals can help you manage security deposits, rent, and tenant interactions ethically and legally. Contact us online or call at 801-889-1517 today!
Originally Published on June 18, 2021
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