Understanding Security Deposits

Almost everyone has dealt with security deposits.  A security deposit is an advance of money, other than an application fee or an advance payment of rent, intended to secure the tenant’s performance under a lease. 

 

Most landlords, whether residential or commercial, require some form of security deposit at the start of a lease.  For residential property, a landlord may retain all or a portion of the security deposit for damages or repairs to the property.  A landlord may not, however, retain any portion of the security deposit for “normal wear and tear” or cleaning fees.  When retaining a portion of the security deposit, the landlord must provide the tenant with a written description and an itemized list of deductions within 30 days of the tenant providing a forwarding address in writing.  If the tenant fails to provide the landlord with a new address in writing, the landlord is not required to provide an itemized list.  A landlord that fails to provide the itemized list or return the security deposit to the tenant is presumed to have acted in bad faith and can be liable for three times the withheld portion of the security deposit and the tenant’s reasonable attorney’s fees to recover the deposit.  Although the obligations are similar, a commercial landlord has sixty days from the date the tenant vacated or provides a new address in writing to return the security deposit.   

 

Using a security deposit to cover the costs of any repairs or damage is legal, but a landlord must be careful.  The requirements are very specific, and violations for improper withholding of a security deposit can be costly.