Landlord Security Deposit Laws: Use, Refund & Restrictions

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application formThe volatile residential real estate market that is currently affecting thousands of homeowners across the country will undoubtedly force many people to postpone their dream of homeownership and settle for life as a tenant in a rental property.

As more and more individuals and families enter into short and long-term leases, it is essential for them to have a basic understanding of the function and permissible use of security deposits.

Security Deposit Uses and Amounts

The basic purpose of a security deposit is to give the landlord some level of protection against excessive wear-and-tear of the property by a tenant. Over the years, many landlords have often charged tenants a disproportionate amount of security upon signing the lease or have misappropriated or misapplied the funds in violation of the law. If you are going to enter into a residential lease, it is imperative that you understand your rights with respect to the security deposit funds you give the landlord.

Many states restrict the amount of security that a landlord may obtain from a tenant. In New Jersey, for example, a landlord may not seek in excess of one and one-half times the regular monthly rent payment as security. Landlords are typically required to deposit the security in an interest bearing account. In New Jersey, the landlord is required to either pay the interest each year directly to the tenant or apply the interest to pay part of the tenant’s rent that is due.

Further, the landlord must disclose via written notice the following:

  1. The name of the bank where the security is deposited
  2. The address of the bank
  3. The type of account in which the security has been placed (i.e. money-market account)
  4. The amount of interest the account pays. This notice usually must be provided to the tenant within a set amount of time, such as thirty days, from the date the landlord receives the security. Most states also require that the tenant be given notice when the security deposit is transferred from one landlord to another (upon the sale of the property) or if the landlord moves the security from one financial institution to another.

In most state statutes, the tenant’s rights are spelled out in the event that a landlord does not handle the security according to law. For example, a tenant may be able to pay past or future rent from the security deposit if the landlord has failed to pay the yearly interest to the tenant or has not given the tenant proper notice about the particulars of the security deposit.

Also, some states forbid the landlord from taking any money from the security to pay for repairs or rent due while the tenant still lives in the property. Landlords are also restricted in collecting additional security from a tenant at the same time that the landlord increases rent.

Refund of the Security Deposit

The most important issue to most tenants is how to retrieve the security deposit upon the expiration of the lease-term. Again, looking to the law in your state should provide the method and time frame for obtaining the security deposit from the landlord. Typically, a landlord must return the security deposit within thirty days of a tenant vacating the property less any charges for unpaid rent and damages to the property. The landlord is obligated to provided a complete list of the damages he/she claims and the estimated cost of repairs in writing and sent via certified mail.

The landlord can only charge for property damage that exceeds ordinary wear and tear. Examples of normal wear and tear are faded paint, window cracks caused by weather and leaky faucets. Also, the landlord can’t deduct a cleaning fee from the security provided the tenant leaves the property in broom-clean condition. Beware of landlords who try to deduct cleaning fees and painting fees from your security deposit!

To protect yourself, have the landlord inspect the property before moving out. Have the landlord sign a note indicating that the premises are clean and undamaged. Finally, take pictures of the property before vacating the premises. Remember–the security deposit is YOUR MONEY. So, make sure you do what is necessary to get it back from the landlord…with interest!

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6 Comments

  1. Hey Joshua i totally agree with the points mentioned by you on the amount of security deposit to be charged by the landlord from the tenant, i would like to make one point over here is that even though the rules and regulations have been fixed related to the amount of security deposit to be charged and other things associated to it,but generally land lords dont agree to all this , they have always been seen asking for money as a security deposit.Nothing is mentioned on the lease dead,why such kind of practices are happening ?
    Give your suggestions on how we all can bring a change in the industry and eradicate such kind of practices…

  2. These are some strict rules by the landlord. Im not to sure whether i agree with this billing strategy, or whether it is morally or ethically correct.

    Andy

  3. Hi, I was renting a room at a privately owened condo. I moved out Aug. 31,07. They cashed my last utilities check on Oct. 15,07. I requested the security deposit back several times. They send me a certified letter on Dec. 7, 07 stating that I now owe for damages for the carpet, when there were none. Isn’t the landlord responsible to give you an itemized list within 30 days for damages? How can she possible keep the security deposit 3 months later without ever notifiying us of damages? Can’t we bring her to small claims for double the amount for not telling us in a timely manner? Thanks any helps would be great.

  4. I’m not a lawyer, but in California, you’d be right (I’m almost positive). I’d look into local law (maybe call the local housing officials) and find out. This is only a guess, but it does sound like you may have a case here, for sure!

  5. Hammad Malik on

    I am a landlord in Maryland. My tenant is in the last two months of her lease. She is refusing to pay one months rent and is insisting I use the security deposit for rent. I know this is not allowed under Maryland law. I just do not know what remedies I have other then going through the eviction process. The tenant knows that the eviction process will not be complete prior to the end of the lease. Can anyone provide any information?

  6. Hi – I’ve been renting a furnished apartment for less than 90 days in Washington D.C. The corporate housing agent refuses to refund our deposit despite confirming that apartment was left in good shape. They are not returning our calls or emails. I am currently on assignment abroad and will not return to US before 2014. I’d like to know if…
    1) is it legal to ask for a deposit for a stay of less than 90 days. we were charged a tax, just as a hotel would.
    2) which body regulates short term/corporate housing?
    3) can I leave it for now and go to small claims court when I return to D.C. in 2014 or is there prescription?

    Thanks for replies.

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