I'm renting my first property in RI, my previous experience has been in MA. I typically charge 1st, last and security for a new tenant.
I was told that was not allowed in RI- anyone have experience with this?
The law is clear that security deposits are limited to one months rent.
§ 34-18-19 Security deposits. – (a) A landlord may not demand or receive a security deposit, however denominated, in an amount or value in excess of one month's periodic rent.
So you cannot also ask for a key deposit, pet deposit or cleaning deposit if it exceeds one months rent. However, last month's rent is not a security deposit, It is prepaid rent. In fact, I don't see anything in the law that says you cannot ask for 12 months rent in advance - if you could get someone to pay it.
Tenant advocates (R.I. Legal Services) have taken the interpretation that you cannot ask for first and last month's rent. I would disagree and to my knowledge neither interpretation has been tested in court.
All of this is fairly moot. As a practical matter, most of the R.I. landlords I know only collect first month plus security deposit.
I'll also add that unlike Massachusetts we don't have to maintain separate escrow accounts for deposits or pay interest on the security deposit (Do you guys still have to do that)?
Oh, I forgot to add, there is a free PDF entitled "R.I. Landlord Tenant Handbook". It's available at www.brown.edu/Administration/Auxiliary_Housing/documents/LTHandbook.pdf or through a Google search. The handbook agrees with me - nothing prohibits asking for last month's rent. Here's the quote from the Handbook; "Separate amounts of money can be requested from a new tenant for prepaid rents, etc."
Michael, here are some useful links for this question and others like it:
- RI Landlord-Tenant Handbook (see page 8 for security deposits)
- RIGL Chapter 34-18: Residential Landlord and Tenant Act (i.e., the actual laws)
- RIGL 34-18-19 Security Deposits (specifically to your question)
The first is an easier-to-read prose summary of the relevant laws, while the second is the set of actual landlord-tenant laws themselves.
I posted both because the Handbook appears to have a revision date of 2007. It is more recent than the version on the Brown site from 2000, but even at 2007, while it's probably generally accurate you should check the actual laws themselves if you really want to be sure.
Or, your best bet, build a relationship with an attorney in RI you can ask such questions of. If they're experienced in real estate they can give you the difference between the laws "on the books" and how judges actually interpret/enforce them in practice, which might be relevant to the question of whether last month's rent is sometimes (by some judges) considered additional security deposit thereby exceeding the maximum of one month.
I was told years ago, by an admittedly pro-tenant individual who taught a class for new landlords, that asking for last month's rent in advance would be interpreted by some judges as extra security deposit and thus get you in trouble. But I've never gotten confirmation of that in practice - hence my recommendation to consult a lawyer (preferably one who does evictions or litigates landlord-tenant issues) if you're seriously thinking of charging last month's rent in advance.
As Rick said, since most landlords don't charge last month's rent in advance, as a practical matter you probably won't be able to anyway. It's hard enough to find good tenants as it is, and if you require last month's rent up front but none of your competition does, who do you think the good tenants are going to go to?
However, if you have a special situation like a more in-demand property (e.g., a very nice apartment on the East Side of Providence), you may have leverage to charge last month's rent and may want to consider it; I've heard from other investors that well-to-do tenants such as doctors are just as likely to skip out on paying at the end of their lease as other tenants (though maybe less likely to trash the place). Always do your screening of course, no matter what kind of property or potential tenant.
Thanks guys, great info!
And Richard, yes in MA we still need to keep deposit in escrow
Hi Guys - you can not request more than one month's worth of rent as a damage deposit, but if your tenant's pay in pre-paid rent, there is NOTHING illegal about this. We often get student's parents asking about paying in a semester, term or annual rent in exchange for a small discount.
Look at the Rhode Island Landlord-Tenant Handbook - see here:
Under section III, the law CLEARLY states:
3. LANDLORD RESPONSIBILITIES
Security Deposits and Other Prepayments
"Separate amounts of money can be requested from a new tenant for prepaid rents, etc."
Please stop spreading misinformation. A landlord can receive Pre-paid last month rent in Rhode Island. They just sometimes choose not to, especially when the renter doesnt have enough move-in money saved up.
This may help a tenant who otherwise would not qualified based on their application (evicted out of previous places for non-payment, no verifiable income, no credit, bad or no landlord history, etc) because they are able to come up with last month's rent to overcome issues with their application that may have otherwise resulted in a legitimate denial of their application because the landlord might be afraid they are going to get "stiffed" otherwise.
Leslie, there is a subtle but very important difference between prepaid rent for specific months (e.g., I am pre-paying rent for the months of January to June 2015) and an undefined "last month".
You could claim it's the last month of the lease, but do you intend to let your tenants not pay you the 12th month (assuming a 1 year lease), or will you expect them to pay the 12th month, and then if it goes month-to-month, the "last month" will just keep rolling? It's the latter that I have been told causes it to be interpreted by some judges as an additional security deposit.
I know many experienced real estate investors in Rhode Island who have different opinions on this. Some take the position that you described. Others agree with that position, but know that if they end up in court there are certain judges who will rule against them on this ambiguous area, in some cases punishingly so.
I'm sorry, but what has been posted on this topic is not "misinformation", period. There is a reason this is an open question among experienced RI real estate owners. I stand by my original post when I wrote "build a relationship with an attorney in RI you can ask such questions of. If they're experienced in real estate they can give you the difference between the laws 'on the books' and how judges actually interpret/enforce them in practice."
We draw up a promisary note for first month,last and security deposit for our RI rentals. But we usually only do that if the tenants a first time renter,self employed,or just recently started a new Job.
I have consulted two different real estate attorneys and having showed them the passage from the law, they agreed that the interpretation does allow for pre-paid rent.
That being said - We do everything with a defined term lease, so that may be the difference. I hadnt given much thought to the fact there may be people doing this on a month to month or open lease. If the term is annual, the lease states the month that is pre-paid i.e. August 2014, and if they renew for another year they opt to transfer and security deposit and that last month i.e. August 2015.
But I do see what your saying on an "open" lease. On a defined lease with a defined month outlined as last month, I'm not sure how a judge could penalize you for a tenant pre-paying rent you would be due per the terms of the lease. We never do month to month or open contract, so I dont know about that world.
I'd be curious on the promissary note structure.
Keep in mind also the idea of "substance over form", namely that no matter what the paperwork says, if the actual practice is different it can be interpreted differently in a court.
One example of this would be a lease that says rent is due on the 1st. However if a tenant habitually pays on the 20th and faces no real consequence for doing so, it could be ruled in a court that the "real" (in practice, substance) due date was the 20th, regardless of what the lease (form) says.
Another example could be that if the last month of a lease, even a specific month, is pre-paid, but when that month comes every year, the tenant pays like normal (as if it had never been pre-paid) and "transfers" the pre-paid month to 12 months ahead, then a court could rule that the substance is that it is being treated by all parties just like an extra deposit (which is also rolled over with a lease renewal), regardless of what the paperwork says.
This may sound like splitting hairs, and there are plenty of landlords who don't care about things like this and never run into a problem.
However it's also possible that you can get a tenant who has authority issues (ever had any of those, anyone?) and wants to fight you tooth and nail over something stupid, even to the point of going to court. If such a tenant, say, gets a free legal aid service (e.g., RI Legal Services http://www.rils.org/) involved, those staff attorneys will have a list of items like excess security deposits that landlords commonly do without consequence, and which can be brought up in court to sway the opinion of the judge toward the tenant (their client).
There is a certain amount of paranoia here, I admit. I try to err on the edge of being too cautious than not cautious enough though, in real estate, since it's one of the more litigious forms of investments. Anyone ever been sued by their stocks? LOL.
Thanks guys, like the debate and information. Since I first posted I have implemented a similar approach for renters that are new, have credit issues, etc... I keep them "60 days" in advance.
My legal advice is that this is most likely fine but is a bit of a gray area in RI.
How about pet deposits? I was told these are illegal in RI but again seems to be a bit of a gray area, any thoughts?
We just increase the months rent for a pet deposit. So if you wanted a pet deposit of 500$ per year and the rent is $1000 a month. make the rent $1040 per month and ask for a $1020 security dep. although $500 seem to be a lot I was just using as an example. most of our investors only ask $25 a month for dogs over 20 pounds. Just be careful of the wording and remember its a deposit for damage its not going to increase your gross income since it should be refundable.
Most people do not even mind spending $25 extra a month even if its not refundable especially if they really like the place.
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