What is a security deposit? Everything You Need to Know
If you’re about to sign a lease on your first apartment, you might be wondering, “What is a security deposit?” Application fees, first and last month’s rent, utilities, and now this security deposit? The string of payments that comes with renting can be daunting. So, it’s not unusual for a slew of questions to run through your head, “What am I being secured for?” “Why do they need this much money?” Look no further, this guide will help clarify all of your security deposit uncertainties and help you determine what a security deposit actually is.
What exactly is a security deposit?
A security deposit is a sum of money that a new resident gives to their landlord or property management company in addition to their advance rent payments. Think of a security deposit as insurance against unpredictable residents. They’re essentially saving your money for a rainy day in case you damage the apartment or skip out on your rent. These kinds of contract violations can potentially cost you hundreds and hundreds of dollars. The bright side? Security deposits are refundable! If you consider yourself a good resident and know you’ll leave the apartment spotless, you have a solid chance of getting your money back. However, the inevitable can always happen and what you don’t know might hurt you.
Let’s take a look at a few security deposit uncertainties, so you won’t be left in the dark when forced to hand over the dough.
How much is a security deposit?
Now that you know what a security deposit is, let’s talk about the typical amount of a security deposit. A good framework for how much a security deposit will set you back depends on where the property is located. Although most states don’t have a required limit, others do.
For example, in Kansas, there is a law for how much a security deposit is. It is as follows:
Unfurnished apartments - one month's rent
Furnished apartments - one and half month’s rent
If you live in Kansas and own a pet, expect to tack on an additional half month of rent to your security deposit to protect against any surprises your furry friend might leave behind. Look out for these details in your state laws so you have an idea of what you’re in for.
Another key factor in how much your security deposit will be is your credit score. Yes, landlords and property management companies have access to this information and use it as a tool to gauge your level of risk. The lower your credit score, the riskier you are considered to be, thus, the pricier your security deposit could potentially be. Some landlords or property management companies even have a standard score that they hold potential residents against to determine whether or not they can move in. So before you apply for an apartment, be sure to check out your credit score to see where you stand. The more money they charge, the more problematic your track record may seem. In other words, mo money, mo problems!
Additionally, when calculating expenses, be sure you know how to spot the difference between extra fees and a security deposit. These fees can be anything from application processing to additional pet fees. Be careful you don’t accidentally lump additional fees in with your security deposit and have your landlord or property management company coming after you for money that you’ve already paid. Stay organized, write separate checks, and read. that. lease!
When do I pay my security deposit and where does it go?
Just like your first month’s rent, you must pay your security deposit before you move in. Your landlord or property management company will most likely give you a checklist of payments before you move in and this will be one of them. Make sure you are punctual about getting your deposit in on time as it can affect whether or not you are able to secure the apartment.
As far as where your security deposit goes, property management companies are required to put your deposit in an interest-bearing account. For example, states like Massachusetts, Maryland, and New Jersey require that individual security deposits be placed in separate bank accounts and that residents are provided with a receipt that shows the bank where it is being held, along with the account’s annual interest rate. This is usually done within a month of your move-in. Regardless of where your security deposit is held, it cannot be spent unless appropriate circumstances arise, such as beyond your typical wear and tear.
If all goes well, when do I get my security deposit back?
Just like the amount of a security deposit, the timeline in which it will be returned to you also varies and is dependent on where the property is located. It can range anywhere from 14 to 60 days post move-out. For argument’s sake, let’s say that your stay doesn’t go smoothly, yet it also doesn’t go terribly. In other words, the apartment could use some thorough cleaning, but it’s not like you burned down the kitchen! Don’t be surprised if small itemized expenses like cleaning or key replacements are deducted from the security deposit. Yes, you might lose a few dollars here and there, but a broken doorknob isn’t a reason for your entire security deposit to be withheld.
If my landlord or rental company refuses to give me my security deposit back, what do I do?
If you feel as though you are getting cheated out of good money and seriously have a good case on your hands, you might want to consider writing a demand letter. A demand letter is essentially a formal argument on why your security deposit should be returned. Most residents and rental companies can reach some sort of compromise this way. However, if things still can’t be negotiated and you have a lot of money at stake, it may be worth filing a lawsuit in small claims court. However, this process can be a major headache. So before you go filing a claim, make sure you’ve pursued all other alternatives.
Other things you might be wondering about security deposits…
Will my security deposit be used to cover damage from natural disasters?
In the event that the perils of mother nature end up damaging your apartment, the money for repairs will not come out of your security deposit. Your security deposit is designated solely for the damage that you yourself have created. And yes, unfortunately sometimes this translates into the damage that your dog, young child, or visitor has created as well. However, the repairs for any uncontrollable damage (i.e. natural disasters) to your apartment will come out of your landlord’s or property manager’s insurance. However, landlord or property management insurance only covers the structure of the apartment itself. This means the actual physical walls, floors, windows, etc. This also means that any damage to your couch, TV, lighting fixtures and any other personal belongings won’t be covered. For this reason, renters insurance is worth looking into. Some landlords and property managers may even require that you have renter’s insurance before signing the lease.
Will my security deposit be used to cover damage from incidents like fires or theft?
Although these can all be viable accidents, depending on the nature of the accident and the kind of insurance policy your landlord or property manager has, next steps can go a couple of different ways. Regardless, these accidents will usually cost you much more than your security deposit so once again, get on that renter's insurance!
Theft: In the case of theft, your landlord or property manager’s insurance will not cover your stolen belongings, however, it will cover any damages to the property itself (e.g. broken window or door) Your landlord or property manager should also be taking proper action to not only make the building safer but to also make you feel safer. Losing your security deposit definitely wouldn’t aid in that effort!
Fires: To put it simply, if you start a fire under your roof, whether it’s an accident or not, you will have to pay for the damage. Regardless of whether or not your security deposit goes towards these repairs, if the damage is severe enough you can expect to pay out of pocket. But let’s say a neighbor starts a fire in their unit and it burns through the walls creating damage in your apartment — you’re not to blame! Either the property management company or the neighbor will pay for repairs. The downside is once again that you will not be compensated for any unsalvageable personal belongings. Hello again, renters insurance!
Can I lose my security deposit if my subletter breaks the rules or damages the apartment?
First things first, make sure subletting is allowed per your lease. If it isn’t, and this illegal subletter damages your apartment, your biggest worry could be having your day in court rather than losing your security deposit. Even if you do get the green light to sublet, it does not mean that there is a liability swap between your subletter and yourself. A lease is a contract, and if you’re still in it, it means you still agree to the terms it is based on. In other words, you are still responsible for breaches in contract like damages to the apartment, unpaid rent, unpaid utilities etc. If your subletter violates any of these conditions, then you could be the one bearing the consequences. However, if you’re dealing with a courteous person, you may be able to negotiate some reimbursements for the costs, but don’t bank on it. With so many things to be liable for, don’t make your subletter one of them!
Can I share my security deposit with my roommate? If so, can I lose it over something they did?
Security deposits are meant to be allocated to separate individuals even if they share the same unit. Logistically speaking, if your roommate has a terrible credit score and you have a great one, they might be looking at a higher security deposit than you are. So no, you can’t share your deposit with your roommate. Separate security deposits, however, does not mean that there can’t be damage that will cost you both. If one roommate sets the kitchen on fire, the security deposit of one may not be enough to cover major damages, so unfortunately, money may be pulled from the other roommate’s deposit.
Now that you know the ins and outs and exactly what a security deposit is, remember that the factors that make up your security deposit can vary depending on your state and the property itself. When in doubt, ask questions! If you’re dealing with a reasonable person, your landlord or property management company should be fully transparent. Knowing where you stand from the beginning will help put your mind (and wallet) at ease.