As a landlord, you have plenty of responsibilities from the condition of your rental property to following all local, state, and federal laws. Out of all the important factors in renting, no issue is more personal to everyone involved than the security deposit. It’s the issue that finds both parties in small claims court or sending angry letters to one another more than anything else.
You’re expected to know and comply with all landlord/tenant laws; this is a top priority when you become a landlord. Stay on the right side of the legal system and make sure you know exactly what you can and can’t do with a tenant’s security deposit.
Keep Good Records
The security deposit you require should be listed in your lease agreement. The amount should be readily available when you market your rental. You and your potential tenants should know exactly what needs to be paid from the very beginning.
Once your tenant pays their security deposit, you need to provide them with a written receipt. It should include the bank account information for where their deposit will be held while they rent from you. If you don’t have it available at the time they pay, you’ll want to provide a second receipt later with the name and location of the bank where the funds are kept.
Most importantly, keep your own records with the date the security deposit was paid, the amount, what account it’s in, and when you issued a receipt. If you ever do find yourself in a courtroom, you’ll be glad you have this information.
Never Co-Mingle Funds
The security deposit should never go into a general fund account or personal bank account. They must always be kept separate from the rest of your funds. Florida law specifically states that a security deposit can not be put into an interest-bearing account.
If you haven’t already set up a separate bank account for security deposits, do it now. Talk to a local bank to get help if you’re unclear about what kind of bank account you need for this. When it comes to security deposits, this may be one of the most important things to remember. Co-mingling of funds gets people in trouble throughout the real estate industry, not just landlords.
Know What the Security Deposit Covers
When your tenant moves in, you need to provide them with a checklist or statement of condition for the property. This indicates what shape the rental is in when they moved in - and lets them know that’s how they should leave it when they move out. You can also have them notate any issues they find as soon as they move in, just in case you missed something. Whether you can keep any portion of the security deposit depends on what your tenants do to the property while they live there.
Once the property is vacant, you’ll need to go inspect it. Normal wear and tear cannot be “repaired” with the security deposit. You can, however, use their security deposit to bring the rental back to the state it was in when the tenants moved in. This includes:
● Painting the walls back to their original color
● Full cleaning - including carpets and floors
● Repairing property damage not reported by the tenants earlier
You can’t automatically keep a security deposit just because someone breaks a lease or violates the terms of the lease. It will depend on the condition they leave the rental in or if they broke the lease without paying the rent.
Returning the Security Deposit
You have between 15 and 60 days to return the security deposit after the tenants move out and release the property back to you. You’ll need to inspect the property as soon as possible to determine if the funds paid to you will need to be used for cleaning or repair. If no damage or cleaning is needed, send the security deposit back immediately. Don’t wait on this.
However, if you find that you’re going to need to repaint walls or deep clean the carpets, get it done as soon as possible. Whether you need only part of the deposit or the whole thing, you’ll need to send your tenants a detailed account of what the money was used for. Make sure you’re only using the funds for approved repairs and cleaning.
Money is personal to people. You don’t want to have to repair your property, and renters don’t want to lose their deposit. Make sure you’re following the law to the letter when it comes to security deposits. As long as you do what you’re supposed to do, you’ll be able to weather any anger from a disappointed tenant.
Is your head swimming? Does it all sound like too much hassle? Work with a property management company who understands the law and has been successfully handling rentals and tenants, including their deposits, for over 30 years. We can help you focus on what matters and make sure your tenants and property are taken care of.