Landlords are Evil. Right?

Security deposit have become a hot topic among society in recent years as many have been or feel that this deposit is another way for landlords to take advantage of their tenants. It’s absolutely true that some landlords screw over their tenants without a care in the world. However, every landlord has or will come across one tenant who burns a hole deep in their pocket. Let’s take a dive into the world of renting and more specifically, security deposits.

What is a Security Deposit?

A security deposit is a sum of money paid before move-in, by a tenant, to the landlord as collateral for potential future damages. Security deposits are refundable at the end of the lease term as long as the landlord has not incurred any missed rent, property damage, or missed utilities. These deposits usually equal 1-2 times one month’s rent and are used as an incentive for the tenant to carry out their end of the lease contract.

Lease contracts state tenants need to 1. pay rent on time and 2. protect the property from excessive damage. The controversial part of security deposits falls towards number 2 and what signifies “excessive damages”. The laws on security deposits differ from every state and township so it’s best to familiarize yourself with the local laws prior to entering into a lease with a landlord.

How Do Security Deposits Work?

After a tenant is approved to move into a property, a landlord will ask for a security deposit prior to moving in. This is an agreed upon amount that will be held by the landlord for the entirety of the lease. At the end of the lease, the landlord will perform an inspection of the property noting any excessive damage created by the tenant. If there is damage or unpaid rent, the landlord will be able to take from the initial security deposit to make themselves whole. This means if a tenant is missing $500 in rent or broke a $500 part, the landlord may take $500 from the security deposit but no more.

In most states a landlord is required to show a receipt of the damages they incurred on behalf of the tenant “proving” they are entitled to a portion of the security deposit. Again, the laws change across the country so your local laws may be different.

How Do I Get My Security Deposit Back?

Tenants are supposed to get their security deposit back at the end of the lease as long as they fulfilled their lease contract obligations. In English, if a tenant didn’t damage anything and paid all their rent, the security deposit should be returned to them. Depending on the state the return will occur sometime between 15-45 days after moving out.

Getting the security deposit back has been a subject of controversy for decades. Unfair landlords will make up reasons to keep the security deposit knowing it will likely cost more money for the tenant to sue than they would receive back from the security deposit. This is why receipts are usually required for landlords to send their tenants proving the costs the tenants created. This issue has given rise to another form of security deposit that we will talk about in the next section.

SDRP Security Deposit Replacement Program

In recent years, laws have changed around security deposits. Some lawmakers ask landlords to stop collecting up front security deposits and instead ask them to bill the tenants at the end of the lease once all the damages have been accounted for. This sounds great but it will cause problems for landlords who get taken advantage of by “professional tenants”. Professional tenants are people who intentionally move into properties knowing they will never pay rent and won’t leave until the court system evicts them. In some states this process can be drawn out for 6-10 months burying the landlord in bills.

A SDRP or security deposit replacement program is a system where a tenant pays no upfront security deposit, but rather pays a monthly installment. This monthly installment doesn’t go towards rent or future damages, it is only a fee for not paying an upfront SD. If the tenant fails to abide by the lease contract, they are still responsible for the damages when choosing this option.

Pros: $0 upfront security deposit, landlords still made whole if tenant misses rent
Cons: Usually more expensive for tenants in long run, landlords could lose more money from professional tenants.

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