What Every Landlord Should Know About Security Deposits
What Every Landlord Should Know About Security Deposits
Security deposits are a standard part of virtually every residential lease — and one of the most legally regulated aspects of landlord-tenant relationships. Mishandling them creates liability that can far exceed the original deposit amount. Here’s what every landlord needs to know to handle them correctly.
How Much Can You Charge?
Security deposit limits vary by state. Many states cap deposits at 1-2 months’ rent. Some states have no cap. Some distinguish between furnished and unfurnished properties. Know your state’s limit before setting your deposit amount — exceeding it creates immediate legal exposure.
Where Must the Deposit Be Held?
Many states require security deposits to be held in a separate, dedicated account — separate from your operating funds or personal accounts. Some states require the account to be interest-bearing and require the landlord to pay the tenant interest accrued during the tenancy. Commingling security deposits with other funds is illegal in most states.
Documentation at Move-In
The move-in inspection is your most important protection for security deposit disputes at move-out. Conduct a thorough, documented walkthrough with the tenant — photographs of every room, every wall, every appliance. Have the tenant sign the move-in condition report. Without this documentation, claims of damage beyond normal wear and tear are very difficult to prove.
Returning the Deposit: Timeline and Itemization
Most states require landlords to return the deposit (or provide an itemized deduction statement) within 14-30 days of the tenant vacating. Missing this deadline can result in forfeiting your right to deductions and owing the tenant penalties — sometimes double or triple the deposit amount. Know your state’s deadline and take it seriously.
Normal Wear and Tear vs. Damage
Landlords can deduct for damage beyond normal wear and tear — but not for normal aging of the property. Small nail holes, minor carpet wear, and faded paint are typically wear and tear. Large holes in walls, stained carpet from pets, and broken fixtures are damage. Document the distinction clearly when making deductions.
Talk to Equity on Repeat about how the property managers we work with handle security deposits across different state laws.