Dealing with the security deposit has always been a long hassle between landlords/property managers and tenants. Security deposits don’t always have to be a problem, this post gives advice to anyone who operates in the world of security deposits for rental properties and addresses some commonly asked questions.
Know your State Laws
It is important to know how much you are legally allowed to collect, where to keep the deposits, and when it should be deposited, as well as what type of reports are required and how to deal with interest being paid. Be sure to understand that deposits for residential properties are under a nondiscriminatory statue and calls for equal treatment. It is against a law to charge an individual less of a deposit than a family with children or to charge an excessively for a security deposit. Make sure to check the laws about security deposits in your area.
Do Not Undercharge for a Security Deposit.
While charging a decent amount less than other rental properties may seem enticing for sales, it will only cause a decent amount of headaches in the long run. In his blog post, Salvatore Friscia from San Diego Premiere Property Management says that there are 3 adequate reasons for not charging less, 1. It’s a good back up against renters moving out unannounced, 2. It will help cover default rental payments, and 3. It also helps detour financially unstable tenants.
Keep Security Deposits in a Separate Account
Even if your state law allows you to keep security deposits together with rental payments, it is smarter to keep them in a different account under your control, otherwise it will be too likely the deposits could be spent elsewhere. Be sure to inform your bank that it is an ‘escrow’ or trust fund to ensure the funds cannot be forfeited in event that your company comes into legal issues.
Keep Property Owners Informed
Be sure to make your property owners aware of your security deposit procedures and guidelines. Some property management companies have made informative videos and brochures for future owners.
Keeping a tight handle on your security deposits helps ensure that you stay on the correct side of the law as well as keeping your properties running smoothly.