No landlord wants to end up in a situation where they have to settle for losing money because of a bad tenant. Sometimes, however, landlords get stuck between whether it is worth it for them to pursue unpaid rent or not.
One such situation that puzzles many landlords is the balance between unpaid rent and security deposits. Can a security deposit be used for unpaid rent back pay?
While you might assume ‘yes’, that’s not always the case. In fact, refusing to give back the security deposit in lieu of unpaid rent could actually get you into more legal trouble than that money is worth!
To avoid being stuck with legal fees instead of unpaid rent, it’s time for you to learn the proper landlord protocol about security deposits and unpaid rent.
A Table of Contents For Covering Unpaid Rent With a Deposit
- The Variations of Security Deposit Laws
- What Your Security Deposit Can Be Used For
- What Your Security Deposit Cannot Be Used For
- Covering Unpaid Rent With A Deposit
Security deposit law may seem to be straightforward, but there’s actually a lot of variations between different states on what can and what cannot happen when it comes to holding security deposits.
That’s right – security deposit laws are handled on the state level!
While there are some important differences between states at times, the general rules used to govern the ways that landlords can implement and release security deposits is generally the same between states.
The following information will aim to take an overarching look at how you can and cannot use a security deposit, but you’ll want to finalize anything you learn with your state’s law(s) before moving forward.
To get an understanding of what you can and cannot do as a landlord who collected a security deposit when a tenant moved in, you need to be familiar with what you can use the security deposit for.
Typically, a landlord takes a security deposit so that they can be sure that their property will be protected throughout the rental period. If all goes to plan, the deposit will be returned to the tenant when they move out.
There are some cases, however, when the property was left in bad condition, or some other situation arose, the landlord may be allowed to deduct losses from the security deposit before returning it to the tenant.
There are limitations to what situations apply to the security deposit in this way. Some of the most common situations include:
- unpaid rent
- unpaid taxes (if outlined in lease that tenant is responsible for them)
- cost of repairing any damages that fall outside of normal wear-and-tear
- early lease termination (if outlined in lease that associated costs will be covered by security deposit)
- excessive cleaning costs
As you can see, the basic idea is that you as a landlord can keep the security deposit to cover unpaid rent or other unexpected costs that were caused directly by tenant neglect.
To make these terms super clear for all parties, it can be helpful to fully outline them in the lease terms so that everyone has a reference point that they can read to understand what is happening with the security deposit.
Just as there are some ways that the security deposit is commonly withheld by landlords, there are a few ways that bad landlords may try to use the security deposit that are not allowed.
While you would never do these things intentionally, it is always good to be aware of what is not allowed so that you can be sure that you don’t accidentally break any laws.
Generally speaking, security deposits cannot be used to cover:
- The last month’s rent (unless previously agreed upon & in writing)
- Basic cleaning costs from normal wear-and-tear
- Basic repairs from normal wear-and-tear
- To cover any costs not related to the tenant
Most of these actions wouldn’t be done by an honest landlord, but there are some landlords out there that take advantage of naive tenants. Avoid falling into this trap by keeping the terms of the security deposit very clear in the rental agreement.
Now, we come to the big question: Can a landlord keep the security deposit for unpaid rent?
We already mentioned this briefly, but the short answer is ‘yes’!
Yes! And that’s a huge part of why the security deposit is usually equivalent to one or two month’s rent since this can help to protect the landlord from not being paid.
If your tenant owes you money when they move out or are evicted, you can subtract that amount of unpaid rent from their total security deposit amount before returning the money.
This is a legal practice, but some tenants will fight you tooth and nail about it. The fact of the matter is that you have a right to get paid the money that you were contractually bound to, and they are responsible for paying it.
If your tenant owes you more in unpaid rent than can be covered by their security deposit, you have a right to evict them before their move out date or to take them to small claims court to fight for the money that you are owed.
In order to protect yourself and to help prevent this kind of situation from developing, it might be smart to outline the details of security deposit related situations clearly on the rental agreement. Make sure that the tenant understands the terms in question before the contract is complete.
Security deposits are made to be a kind of guarantee between yourself and the tenant that they will keep the property in good condition while they are living in it. Generally, people think of security deposits as a way to fix damages caused by tenants, but the deposit is also useful in claiming back unpaid rent.
If your tenant owes you in unpaid rent:
- Check your lease terms
- Subtract the amount owed out of the security deposit before returning it
- File in small claims court for any additional money owed that cannot be covered by the deposit
By following these steps, you will ensure that you do not give back more than you must to tenants who broke the lease by failing to pay rent.