It's always in the landlord's (and tenant's) best interest to get a security deposit at the beginning of a lease. The security deposit protects you, your property, and the tenant in the event of damage.
But what do you do with the security deposit after you collect it? You know that the deposit has to be refundable, but what are the landlord responsibilities and tenant laws that you have to consider when you're handling it?
We're here to talk about it. Keep reading to learn all about handling security deposits.
Collecting the Initial Deposit
All tenants fully expect to pay a security deposit when they sign their lease, and they'll do so happily because they know that it will be returned to them (unless there are extenuating circumstances. More on that later).
In Maryland, you may not charge a security deposit that's more than two times the cost of the rent. This is true regardless of how many people are staying in the rental home.
We recommend matching the security deposit to the rent to make things easier for both parties. This will also encourage more people to apply for your apartment.
Collect the deposit when you collect the first month's rent.
Holding Security Deposits During Tenancy
Because you're going to be giving the deposit back to the tenant later, you need to make sure that you're keeping it safe in the meantime. If you lose that money, you risk legal trouble.
We recommend putting that money in a separate savings account, like an interest-bearing escrow account. These accounts are great for when you have to transfer money between two people, but not immediately.
Remember that it's one of your landlord's responsibilities to return that money later.
Returning the Deposit
At the end of a tenant's stay on your rental property, it's time to return a security deposit. Many landlords resist returning deposits and may come up with arbitrary reasons not to, but this puts you at risk and will damage your reputation.
So when can you keep a security deposit?
If there's any serious damage to the property after a tenant leaves, you can retain the amount of money that it would cost to fix the damage. This doesn't include basic maintenance costs or anything that would be considered normal wear and tear. Remember, your tenant has spent a lot of time in their rental, so chips in the paint, discoloration, and other small problems are normal.
You have 30 days to return the deposit or tell the tenant why you aren't returning it. It's helpful to provide pictures and a breakdown of the costs associated with any damage to the property.
Do You Understand Security Deposits?
Having a firm understanding of security deposits will protect you from legal troubles and keep your tenants happy. Make sure that you set aside your tenant's security deposit so you can hold up your end of the bargain and return it to them when they leave.
Do you need help managing security deposits in Baltimore? It might be time to invest in professional property management.
Contact us at HomeRiver Group so we can start working together today.