What is a security deposit?

Why landlords charge security deposits, pet deposits, and down payments

A security deposit is an upfront payment your landlord requires prior to moving in — typically equal to one month’s rent.  The money is used to fix or replace items in your rental unit when you move out. Your state law dictates how much can be charged, how it can be used, and how it’s to be refunded.

Let’s say you consider yourself a responsible person. You pay your bills on time, have a decent job, and stay out of trouble. You are probably wondering why your landlord requires so much money to sit on while you rent.  Landlords and property management companies charge a security deposit to cover their risks. The deposit can help cover the cost to repair damages to the property, cleaning fees, unpaid rent, unpaid utilities, and legal costs.

• Property damage

While property managers cannot charge for general wear and tear, such as expected carpet damage or new paint if you’ve been there a long time, they can charge for other types of damage Victoria Cowart, Director of Operations of Adalease Property Management said they are mostly looking for damages to “appliances, walls, flooring, carpeting, and window coverings.”

• Cleaning Fees

Many will also charge you a non-refundable cleaning fee which often covers things like cleaning the carpets. The security deposit may also be used to clean things such as the refrigerator, oven, or bathroom. According to Coward, she has not noticed landlords charging more for cleaning due to COVID-19.

• Unpaid rent, fees, or utilities

Security deposits can be used to pay unpaid bills or fees outlined in the lease agreement such as utilities, refuse fees, late fees, and more.

• Legal fees

If your landlord has to use the courts or legal means to collect money, they may also charge you to cover those costs as well. Your lease will tell you if this kind of charge is possible.

How much security deposit can landlords charge?

While landlords and property management companies have some say in how much deposit they ask you to pay, many state laws regulate aspects of the security deposit such as:

• How long the landlord has to refund your deposit 

• How much deposit can be charged

• If deductions need to be itemized

• How disputes have to be processed 

• How they can and cannot use that money while you are in your lease

• Maximum penalties that can be awarded to you in a dispute and statute of limitations (time limit you can sue)

In most situations, you can expect to pay roughly a month’s worth of rent for your security deposit.  

What is a non-refundable cleaning deposit?

Your landlord may outline in your lease agreement that a portion of your deposit is non-refundable to pay for cleaning. A non-refundable cleaning deposit is most often used to cover the cost of routine cleaning like carpet cleaning. It may also cover tasks such as window cover cleaning.

Keep in mind that even if you pay a non-refundable cleaning deposit that doesn’t mean you don’t have to clean the unit before you give up your keys. In most cases, these funds are not used to pay a cleaning service to clean up your left behind dirty counters or shower walls. Normal cleaning tasks are still your responsibility.

Can landlords charge pet deposits?

In some states, property management companies can charge a pet deposit. They may even charge a different rate depending on the animal type or breed.

Most requested deposits are about $100-$300 per pet. Pet rent may also be charged. Pet rent is often charged at $25-$50 per month per pet. While general cleaning fees may not be returned from your pet deposit when you move out, you may receive part of your deposit back at move-out time if no pet damage occurred.

In most locations, service animals are not considered “pets” but rather trained service animals and may not be subjected to additional fees. However, landlords may request payment for damage caused by the service animal if applicable.

Apartment security deposits as down payments

Apartment communities screen applicants who are hoping to sign a lease. These financial screenings may include information from your credit report, rental history, and income sources. The security deposit amount is based on the results of the screening, which indicates your financial status.

Some property managers may use your deposit as a placeholder (or down payment) for a specific apartment that you are wishing to rent. The money is considered an “in good faith” deposit to hold the unit for you while your paperwork is being processed. Once you are approved, that money is put towards your security deposit.

How do landlords determine how much of the security deposit to return? 

The landlord will deduct from your deposit in three ways: by what is allowed by law, by what is stated in the lease, and by their discretion.

1. Allowed by law

The landlord must follow the local tenant-landlord laws for what they can deduct, how they communicate with you about what they deduct, and when they must return your deposit refund amount. 

2. Allowed by the lease

The lease will spell out charges that are non-refundable as well as deductions they’ll make should damage occur. Here is an example of a security deposit lease paragraph.  As you can see, it’s quite detailed and covers several things that you should be careful about when you live in the apartment and when you move out.

3. Allowed by their own discretion

Usually this is the cost to cover damages and it is often the most disputed portion. 

If possible, it is in your best interest to attend the move-out inspection so you can discuss with the property manager any possible damage or cleaning issues. 

Cowart says, “We invite the resident to walk through the inspection with us.” And,  “We take photos and we take notes at move-in and then again at move-out and compare. And if there are charges at move-out, the photos are used to support those charges.” If you have a disagreement about your refund, consider sending your landlord a demand letter.

What about security deposit insurance or bonds?

Security deposit insurance usually covers what a standard deposit does such as back rent and property damage but does not require the renter to pay a large deposit upfront. Instead, the renter essentially buys a “bond” that ensures the landlord against damage or lost rent. 

What you’ll want to watch out for are the monthly non-refundable fee you may end up paying. These fees only go towards helping the property pay their insurance and you still may be charged money on move-out for any damages. Companies like Jetty, HelloRented, or LeaseLock offer such products for properties. 

Can landlords spend my security deposit?

In some areas, it may be required that the deposit funds be kept in a zero-interest saving or escrow account so it is guaranteed to be available at move-out time. Additionally, they may be restricted from using the funds except for approved expenses.

At the move-out time, many states require an itemized list of the expenses deducted from your deposit to be shared with you. Make sure to ask for this if you don’t get it. Read other Roost articles for tips on how to get your security deposit back.