Tenant Issues – Security Deposit: Should You Require One

Should you require a security deposit if you own property that you want to rent to others? In a word, yes.

Tenant Issues - Security Deposit: Should You Require OneA security deposit is a sum of money held against the possibility of future damage done to the property. The amount of the deposit is up to the landlord, thought there may be local or state laws controlling what the amount to be required can be, and it is spelled out in the lease agreement.

There are rules that are spelled out in local and/or state law that tell a landlord what they can do with a security deposit, where they have to put it during the pendency of the lease, if they can earn interest, and when and how much must be returned to the tenant when the lease is ended. These rules are often complicated and take consulting an attorney. If you don’t follow the laws, some states require the landlord to pay twice the amount of the security deposit.

So, you’re thinking, this tenant is trustworthy. They look nice enough. So why do I need to take one? Fair question. But what do you know about this person? Do they have children? Do they have pets? Do they have a hobby that could possibly do damage to your property? What about their friends? Have you done a background check? Maybe they aren’t who they seem. Taking someone at face value could cost you a lot of money after they leave, and once they are gone, tracking them down to collect reimbursement for the damage they did will cost you even more.

Your best bet is to require a security deposit, and to use a property management company to help you (like Denver Realty and Rentals). They can hold the deposit for you. They know the rules. They will do background checks on your prospective tenants and take care of maintaining your property. After the lease is finished, they can make the repairs to the property, deduct the cost from the deposit and return the balance to your tenant. Simple and legal.

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