The security deposit, though often seen as a minor part of rental property management, is actually very important. As a property owner in Manhattan Beach, you need to be familiar with the rules about tenant security deposits. Unlike rental payments, security deposits aren’t considered part of your investment income. Specific guidelines must be followed when dealing with security deposits, from acceptance to reimbursement.
Being informed about these rules empowers you to decide on the amount to charge and the proper use of the security deposit after the tenant moves out. We will go over the basics of security deposits in this article, providing you with the knowledge to handle them efficiently from start to finish.
How much should you charge for a security deposit?
Deciding the amount to charge for a security deposit is a crucial step before advertising a rental property. Your location may impose limits on security deposit amounts, so review state and local laws carefully before setting a figure.
The standard security deposit amount is usually the same as one month’s rent, plus any cleaning or pet deposits. Compare the security deposit rates of other landlords in your area to keep your own rates competitive. Setting a high security deposit might scare away prospective tenants.
Ethically handle security deposit funds
Knowing your state’s rules on where to keep the security deposit is crucial once you receive the funds. In some states, landlords must store the security deposit in an interest-bearing account, though others allow various options.
Regardless of your area’s laws, it’s crucial to meticulously document where the security deposit is held and not spend it without legal cause.
Stay responsible with tenant security deposits
Landlords can keep and use a tenant’s security deposit in particular situations. Typically, this is to cover repair costs for damages that go beyond normal wear and tear. Such cases include a broken appliance, considerable wall damage, or 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. Adhering to these legal and ethical rules makes you a fair and responsible landlord.
Other valid reasons to keep a tenant’s security deposit are cleaning costs, unpaid bills, and in certain cases, a broken lease or nonpayment of 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
You need to decide the refund amount of the security deposit once your tenant has moved out. The landlord must return the entire refundable security deposit if the lease terms are fully met. Most states mandate that the refund be issued within a particular timeframe, often within 30 days or less. When withholding a portion of the security deposit, it is essential to include an itemized list of repairs paid for with the funds.
Even without a state requirement, it’s good practice in property management to inform your tenant clearly about any withheld funds to prevent misunderstandings or legal actions. If a landlord delays returning the security deposit or providing an itemized bill for deductions, they may have to pay the tenant up to three times the deposit as a penalty.
Security deposit concerns can be more complicated than they might initially appear. The professionals at Real Property Management California Coast are trusted by Manhattan Beach rental property owners. Our local property management experts understand state laws and can help you manage security deposits, rent, and tenant interactions in an ethical and legal manner. Contact us online or call at 310-535-2150 today!
Originally Published on June 18, 2021
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