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Writer's pictureBilly L.

All About Security Deposits


For landlords, the security deposit is a protective assurance that renters will comply with the lease. In the United States, all states allow landlords to obtain security deposits. It makes sense to do so even though you're not required by statute to collect security deposits. In this way, landlords have a financial promise that if the occupant causes extensive damage or walks out without paying rent, at least some expenses will be taken care of.

It's important to review the applicable landlord-tenant rules in your state before you seek a security deposit. A few states impose strict limitations on the size of security deposits. Also, the sum you receive may vary on the age of the tenant.

State regulations differ around the nation on how and where security deposits should be kept by landlords. You will be required, for instance, to hold the deposit in an account that generates interest. You may also have to report accrued interest to the tenant each year.

After signing the lease, but before handing the renters the keys, you can collect the security deposit and first month's rent. Before continuing, it's a good idea to ensure the funds have become available in your bank account.

Landlords are required to abide by the legislation and municipal laws. This suggests that when they sign the lease, only then should renters pay rent and the security deposit. It makes sense, though to hand over the keys only once the rent check receives full clearance. Wise landlords usually relegate security deposits to money orders, cashier's checks, or internet payments.

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