Security Deposit 101: Definition and All Your Questions, Answered

This article continues with one of the most fundamental rental concepts every renter should know and understand! 

Today, we take a closer look at the security deposit and everything related to it. 

If you have any questions about a security deposit, its definition, the amount of a security deposit the landlord can charge, or how to get your security deposit back, you’re in the right place!

To make it easier for you to navigate the article, we created a table of contents — simply dive into the subject that interests you the most. Or, read the whole thing to become an expert in any security deposit-related matter!

What is a Security Deposit, Exactly?

For starters, let’s take a closer look at a security deposit definition. Basically, a security deposit is an extra amount of money a tenant pays to a landlord before moving into a new place. It serves as the landlord’s insurance against negligent renters that might cause any damage to the apartment.

Unlike many other expenses you might encounter as a tenant, the security deposit is refundable (with some exceptions, but we’ll get to that later!). It is returned to a tenant when they move out from the rental. 

How Much is a Security Deposit?

The security deposit amount is somewhat related to monthly rent but does not have to reflect it 100%. Generally, it is up to the landlord to decide how much they want their security deposit to be, or if they’re going to charge it at all. As a general rule of thumb, it usually equals one month’s rent.

Also, there are specific laws and regulations regarding the security deposit in landlord-tenant law. When deciding on the amount of rent, the landlord has to comply with these regulations. 

As you know, each state has its own laws, and even when it comes to defining how much the security deposit should be, you can see large discrepancies. In California, for example, the security deposit cannot exceed two months’ rent if the apartment is unfurnished and three months’ rent if the place is furnished. In Illinois, however, there is simply no limit on the amount of security deposit (that’s a common practice in many states).

More like this: Best Ways to Keep Your Apartment in Great Condition

When Should You Pay a Security Deposit?

Usually, you pay your deposit before getting the keys to a new rental, but either during or after signing a rental agreement. That’s why you should account for this extra amount when searching for a new apartment. 

If possible, avoid paying a security deposit in cash; go for some more trackable options, such as a check or bank transfer. This way, you’ll have proof of paying money to the property manager. If paying in cash, make sure to receive a written receipt, as it will help you if you have any problems retrieving the deposit back.

Also, ensure that the existence of the security deposit and its amount is indicated in the rental agreement!

What Happens With a Deposit During Your Tenancy

Let’s move on to the next step of our security deposit journey. Imagine you moved into a new apartment after giving a security deposit to the property manager. You’re enjoying your life in the new place. Wonder what happens with your money in the meantime?

According to tenant-landlord laws in many states, the landlord or property manager must keep the security deposit in the bank account. As a tenant, you’re entitled to know the name and address of the bank where the deposit is held. Other states, however, do not require landlords to put security deposits in the bank. For example, there is no mention of how and where the deposit should be kept in Oregon’s tenant law.

Another detail that differs all around the US is the interest that the security deposit accumulates. Some states, such as Connecticut, require every landlord to pay interest on the security deposit they’re holding annually. Some other states have certain conditions that have to be fulfilled for a tenant to receive interest from the security deposit. For example, if you are a renter in Pennsylvania, your security deposit will start accumulating interest only after you spend two years at the rental. And, of course, some state laws do not mention any interest at all — remember Oregon?

When and How Do I Get My Security Deposit Back?

Ready to move out and plan on getting back your deposit? You’ve probably already figured out that the amount of time to receive back your deposit depends on your state, once again.

The difference can be pretty significant — in New Jersey, you must receive your deposit back within 15 days after moving out, while in Illinois it takes up to 45 days. 

When it comes to the method of sending back the deposit, you might expect to receive a check in your mail or a bank transfer — it depends on your agreement with the property manager.

Reasons to Withhold the Security Deposit

As you remember, the security deposit exists as insurance for landlords against any damages in the rental. That’s why there are certain situations in which the property manager can retain the whole deposit or some part of it. These include:

Damage beyond normal wear and tear

It can be debated what wear and tear means in each specific case. Of course, it is not required for a tenant to leave the place in even better condition than when they moved in. Let’s assume that you spent three years at your rental, and now you have a few minor stains on your kitchen walls and a broken ceiling light.

Stains on kitchen walls can be considered as normal wear and tear. You might have a stain or two on a carpet or a bump in the wall from a doorknob — it’s understandable. However, if certain damages occurred because of your negligence, such as knocking down the ceiling light during a pillow fight, the landlord has a right to replace it using some part of your deposit.

Unpaid rent or breach of contract

Another basis for the property manager to withhold the deposit is if the tenant does not pay rent in full while moving out or if the tenant breaks the lease and decides to leave earlier than it was agreed in the contract.

More like this: As a Tenant, What are you Responsible for

Cleaning fees

Finally, the last reason why the landlord might deduct some part of the deposit is if the apartment is messy and needs cleaning after the tenant. Fees can include mopping and vacuuming floors, cleaning the bathtub, dusting, etc.

Note that if the landlord decides that they have a reason to keep the deposit, they are required to send an itemized list of damages and charges. Also, you can read here how to make sure you get your security deposit back.

Common Questions About Security Deposits

• Can the security deposit increase over time?

Yes, in some states. For example, New Jersey laws allow to increase a deposit once a year, but the amount of increase cannot exceed 10% of the total security deposit. 

• Are the security deposit and last month’s rent the same thing?

This depends on your lease agreement as well as the state regulations. In certain states, landlords may ask for two separate payments — a security deposit and the last month’s rent. The last month’s rent can only cover unpaid rent, not any damages or cleaning fees.

• Can the landlord ask for a higher security deposit if I have a pet?

Yes, it is common for landlords to require an additional pet deposit if you move in with your furry companion. In some cases, it can be a one-time fee, while sometimes you might have to pay pet rent. Some state laws have specific regulations on the amount of pet deposit; others might not mention it at all. Here’s an article you might find useful if you want to know more about pet deposits and pet fees.