You have identified a rental property that meets all your needs and you cannot wait to move in. However, there are a variety of financial obligations that you have to meet before you can move in to your new home. Another requirement is the payment of a security deposit in addition to your first and last month’s rent. But what exactly is a security deposit? Here we will examine everything renters should know about security deposits.
What is a security deposit?
You can view a security deposit as the first line of defence for landlords. A tenant will remit a security deposit to a landlord prior to moving in to the rental property. Any damage that a tenant causes to a rental property will be covered by a security deposit. The security deposit will cover damage that goes beyond typical wear and tear. A security deposit will cover:
1. Property damage
One of the most common things covered by a security deposit is property damage. However, the type of damage covered by a security deposit must be beyond normal wear and tear. Anything from patching holes in the walls to replacing damaged fixtures, can be covered by a security deposit.
2. Missed rent payments
Secondly, a landlord may use funds from your security deposit in the event that you have missed several rent payments. If you owe back rent at the time of vacating the property then the landlord will not reimburse you the security deposit.
3. Cleaning expenses
Finally, any professional cleaning that may be required after a tenant moves out of the property is also covered by a security deposit.
How are security deposits calculated?
When it comes to security deposits there isn’t a single set rate. That is to say, landlords require varying amounts for security deposits. However, the amount for security deposits is typically between one to three months. It is essential that landlords verify the maximum amount there are allowed to charge in their area.
The impact of your credit score
Your credit score can have a huge bearing on the rate of security deposit you are charged. A landlord may perceive you as a high-risk tenant and therefore charge you a high security deposit. The security deposit will act as insurance in the event that you default on your financial obligations. As such, a good credit score will save you money.
Security deposit disclosures
Landlords have a legal obligation to disclose what happens to a tenant’s security deposit. In most cases, landlords will place the entire security deposit in a bank account. Some country’s legally require landlords to place the security deposit in account as well as provide the tenant with the name and address of the bank. In addition, landlords may also be required to pay tenants interest on their security deposit.
Security deposit deductions
Deductions on security deposits usually occur to rectify any damage caused by the tenant. Moreover, these deductions can be carried out if the tenant is owing back rent. A landlord must provide a valid and legitimate reason to the tenant for deductions to the security deposit.
Refunding security deposits
One a tenant vacates the property then the landlord can refund a tenant their security deposit minus any deductions. The refund of security deposits must take place in the shortest period of time after a tenant moves out from a rental. As such, a landlord will produce a refund of the security deposit after a property inspection.