Managing a rental property involves various aspects, and the security deposit, often considered minor, is actually crucial. Being a property owner in Menomonee Falls means you must be aware of the rules regarding tenant security deposits. Security deposits are distinct from rental payments because they are not part of your investment income. When managing security deposits, you must follow specific rules for accepting, depositing, and reimbursing these funds.
Knowing these guidelines enables you to determine the right amount to charge and the legal and ethical use of the security deposit after tenant departure. This article will cover the basics of security deposits, providing you with the knowledge to manage them effectively from beginning to end.
How much should you charge for a security deposit?
Rental property owners must decide on the security deposit amount before listing their property. Depending on your location, legal limits might exist on security deposits, so verify state and local laws before setting an amount.
The standard security deposit amount is usually the same as one month’s rent, plus any cleaning or pet deposits. Look into what other local landlords charge for security deposits to keep your rates competitive. Excessive security deposits can turn away potential tenants.
Ethically handle security deposit funds
Upon obtaining the security deposit, it’s vital to be aware of your state’s rules about where to hold it. In some states, landlords must store the security deposit in an interest-bearing account, though others allow various options.
Regardless of regulations, it’s fundamental to maintain thorough records of where the security deposit is held and not use it without legal documentation.
Stay responsible with tenant security deposits
Specific circumstances enable landlords to retain and utilize a tenant’s security deposit. The most frequent reason is to cover repairs for damage exceeding normal wear and tear. Such cases include a broken appliance, considerable wall damage, or heavily stained carpet.
Note that it is illegal to withhold security deposit funds for projects not related to tenant-caused damage beyond normal wear and tear. Following these legal and ethical guidelines will help you become a responsible and fair landlord.
Other reasons to ethically retain a tenant’s security deposit include cleaning costs, unpaid bills, and at times, a broken lease or nonpayment of rent. Yet, some states don’t allow landlords to use security deposit funds for unpaid fines or late fees, so it’s essential to know your local regulations.
Refund security deposits to tenants
After your tenant vacates, you need to determine how much of their security deposit will be returned. The landlord must return the entire refundable security deposit if the lease terms are fully met. This refund often needs to be issued within a set period in many states, usually 30 days or under. Should you withhold any security deposit funds, an itemized list of the repairs paid for is essential.
Regardless of state requirements, clearly informing your tenant about any withheld funds is a best practice to avoid misunderstandings or legal issues. Taking too long to return the security deposit or to provide an itemized bill for deductions can result in a penalty of up to three times the deposit amount.
The complexities of security deposit issues can often exceed initial expectations. Menomonee Falls rental property owners count on the expertise of Real Property Management Greater Milwaukee professionals. Our local property management professionals, knowledgeable about state laws, can assist you with handling security deposits, rent, and tenant interactions ethically and legally. Contact us online or call at 262-309-6961 today!
Originally Published on June 18, 2021
We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.
