Increasing security deposit with each rent increase?

Question

Originally, I start off where the security deposit was equal to one month's rent. But, every time you increase the rent, do you also increase the security deposit so that it continues to be equal to the new amount for one month's rent?

Otherwise, if the tenant has been there awhile and you've increased the rent each time, there could be a big disconnect between the increased rent and the original security deposit.

If you do increase the SD each time, how do you go about doing it? If the rent increased by a $100 dollars, do you have the tenant give you a check for $100 for the SD? Or, do you return the initial SD to the tenant and have the tenant write you a new SD that covers the whole SD?

Account Closed · Answer

Increase the Security Deposit when the next tenant moves in.

The tenant is staying knowing their rent has increased and that's a good sign.  Making them pay an additional Security Deposit is just begging for them to move.

Nancy Neville

Jerry W. · Answer

I have never increased the damage deposit when I increase the rent.

Jeff S. · Answer

Short answer is no unless you want to lose your tenant.

Bill Gulley · Answer

If I had a tenant for 10 years I'm not sure I'd need to raise the rent, much less the deposit. If you consider the 10% vacancy expense you saved over 9 years, I'd probably be satisfied and in less time than that I'd know if there was any damage to be covered.

And raising rents a hundred bucks means your rents were probably a thousand a month, that would be like asking a tenant to pack up. Now, if rents increased $25 are you going to ask for another $25 for deposits? Not me, no, if the tenant is that bad I'd be getting rid of them. : )

Paul C. · Answer

I don't collect additional security deposits when rents increase.  If rent has increased on an existing tenant, it means you're already saving yourself a lot of money avoiding turnover.I would count that as a victory and move on.  Asking for an additional deposit could make the tenant feel like you're nickel and diming them and leave a bad taste in their mouth.  Not worth it for the small amount of money we're talking about -- which is quite possibly going to be refunded at the end of the lease anyway.

Sam Leon · Answer

I do.

Not only I increase the security deposit, I increase the last month advanced rent too.

So yes there are additional fees when rent is increased to align everything.  This is not for all properties obviously.  On the nicer homes that I ask for first, last, security to move in, the tenants wouldn't blink an eye to that.  On another property that I only ask for SD + 1 month rent on move in, I might not do it.

However, I only raise rent on lease renewal time, so there is already a new lease to put in place, and the new lease has the additional fees section you can put in the assortment of those that you can total up.

WAYNE G. · Answer

The Nanny state of Maryland takes care of this for you.  You must escrow security deposits and pay 3% interest on the funds.  Isn't that great, it has an automatic increase built in.  (Of course you know where that money comes form, because it is not from interest on the account.)

Effective Jan 1 2015 it becomes a floating rate with a floor of 1.5%.  It is so complex they must provide a web based calculator.

Steve Babiak · Answer

I always increase the deposit when rent increases, and always ask that it be paid separately since it gets deposited into a separate bank account. The tenants get an annual copy of that bank statement showing that the money is there, so they know it wasn't pocketed.

Others here seem to think it's unnecessary, but if you have a tenant for over 10 years, you realize that inflation causes the repair costs to escalate - but you don't have as much to cover that repair unless you did those incremental increases to the security deposit. It is tough to ask for that all at once upon realizing that it will be more expensive to repair things.

Then there is the matter of "last month's rent" if you collect money for that ... You will want to increase that too; when I was collecting money for that it was called "security toward last month's rent" ...

James Wise · Answer

I agree with the other posters.

Increasing security deposit with each rent increase?

Most Popular Reply