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Rent and Security Deposit Tips for Landords

After all the work landlords do to make sure their rental units are habitable and comfortable, collecting rent and security deposits probably seems like the easy part. However, there are certain rules landlords must follow when taking their tenant's money. Here are some quick tips to help landlords avoid making a legal misstep.

Tips for Handling Rent

There are few rules about collecting rent. Nevertheless, it's best to treat the payment of rent with some care, since a mistake could potentially lead to a legal dispute.

  • Be clear about the amount of rent due, the due date, and the method of payment. It's best to put these provisions in the lease so that the tenant can check back when necessary. If any of these terms change, be sure to send written notice to the tenant as soon as possible.
  • Provide a receipt. Some states or cities may require you to do so anyway. There are typically no major requirements for a receipt. An email that says "I have received your rent today, thank you!" may be sufficient. However, a receipt should typically state the date the rent was received, the amount received, the name of the tenant, the tenant's unit number, and the dates covered by the rent.

Tips for Handling Security Deposits

Handling security deposits is a bit trickier. That's because many jurisdictions consider the security deposit to be the tenant's money, even though it's in the landlord's possession.

It is a best practice (and your state or city may require it) that you keep security deposit monies separate from your own money. Deposit them in an interest-bearing account, as some states will require that you repay the deposit with interest. Some states also limit the amount of a security deposit.

There are also rules about the types of repairs you can make using the security deposit. Generally, you can only use the security deposit to fix damage caused by the tenant, not "normal wear and tear." Normal wear and tear includes things like:

  • Furniture marks on the wall
  • A reasonable amount of wear on the carpet
  • Warped doors and windows due to age
  • Dents in the walls from door handles
  • Replacement smoke detector batteries, etc.

The rules for returning the security deposit vary by state. Some states require landlords to list any repairs made and paid for with the security deposit, along with their cost. Many states have deadlines by which the security deposit must be returned, so don't delay making repairs when the tenant moves out.

Also, require that the tenant leave a forwarding address in writing so you know where to return the security deposit monies.

Finally, if you decide to collect last month's rent instead of a security deposit, generally you can only use that money as the last month's rent, as opposed to using it to pay for any repairs to the unit.

Related Resources

Legal Concerns About Rent and Security Deposits? Call an Attorney

As a landlord, following the law while employing the practices listed above will help you avoid problems with tenants in the future. If you have a dispute with a tenant today, or need legal help with your lease agreement, talk to a local landlord-tenant law attorney.

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