What Is A “Security Deposit”?

A “security deposit” is an amount of money the tenant gives to the landlord when the tenancy begins. What it covers depends on what the agreement (oral or written) says about it. It might cover unpaid rent, damage to the premises, or cleaning charges. People often get into fights about security deposits because the original agreement was too vague. If the agreement says “for cleaning,” write down clearly what “cleaning” means. Does it include cleaning the oven? Shampooing the carpet? Dry cleaning the drapes? Automatically, or only if these things are dirty? To save everyone a lot of grief later, spell it out. And tour the premises with the tenant when she first moves in to see if there is any damage caused by prior tenants. If so, write it on the agreement so the tenant can’t later complain that there were other damages caused by prior tenants.

A tenant just moved out, and she is demanding her security deposit back. I don’t think I owe it to her. What should I do?

When the tenant moves out, again tour the premises with the tenant so you can work out any disputes then and there. After she has left, she might claim that damages you attributed to her were not there. True, it’s “your word against hers,” but a judge might believe her word instead of yours.

Tenants sometimes sue landlords for failure to return security deposits. Some states (such as California) even allow you to recover extra “punitive” damages if he withheld the deposit “in bad faith.

What should I do with the security deposits if I sell the building?

If you sell your building, be careful. Unless you either return the security deposits to tenants or properly notify them that you are turning them over to their new landlord, you might remain liable to your tenants for return of the deposits even after you no longer own the building. You made an agreement with the tenants, and you don’t necessarily get out of it by selling the building. To be safe, see a lawyer when you sell your building to make sure you’ve done everything right to end your potential liability.

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