When entering into a rental agreement, there is a payment of the first months rent usually accompanied by the last months rent, a security deposit or a combination of them both. Depending on your properties location, you may have to choose only one so that tenants can afford your unit. How do you choose which one? There are factors that go into making that decision. If a landlord chooses to require first and last month’s rent including a security deposit there are a few things that it could be used for. At the beginning of a new tenancy you will want to have prepared a move-in checklist. The checklist is comprised of items throughout the house that could be damaged or dirty. If the unit was in perfect condition and has taken on any damage during the duration of tenancy, the owner is able to document damages and deduct it from the security deposit for repairs.

Other uses for the security deposit could be to cover unpaid rent or restoring the properties cleanliness back to previous condition, making sure all items are documented and provided to the tenant along with all receipts for works completed. The deduction may not exceed the cost of the repairs. If the owner were to not require a security deposit these repairs become the responsibility of the landlord.

While the security deposit can be great for a landlord’s protection against losses, there are exemptions from security deductions. A landlord may not make deductions from a tenants security based off prior damage to the home or anything that occurs from normal wear and tear. If a landlord is found making unjust deductions they can be brought to a small claims court. If found making unjust deductions the landlord can be penalized the entirety of the security plus an additional penalty that can be up to three times the deposit total.

Finally comes preparing for your tenants departure. When the lease is up for your tenant, there should be another checklist or the same list as during the beginning of the tenancy, that should be reviewed to make sure no additional damages have been made. Once the inspection process is complete, it varies from state to state but usually the security deposit should be returned within 30 days after the move out date.

Has anyone had an issue with security deposits whether its dealing with court? Not requiring a security up front? What combinations do you require up front and what are some of their advantages?