Using Security Deposit as Last Month's Rent?

Toward the end of a lease agreement, some tenants request that the landlord start using a security deposit towards last month’s rent. Landlords need to consider how else they will get funds for damages if the security deposit is used for rent instead.

Why Tenants Try Using a Security Deposit Towards Last Month’s Rent ?

There’s no doubt that moving from one apartment to the other is expensive.

Tenants that are moving often have to give a whole new security deposit. Also, they often pay first and last month’s rent to their new landlord. This has to happen before they get their current security deposit back from the current landlord.

This situation can leave many people short on funds. It may seem like a simple solution for the current landlord to just take the last month of rent out of the security deposit rather than to refund it.

Other times, the tenant is being evicted and may owe the landlord a month of rent. They figure the landlord already has the money in hand for the security deposit. They see no reason why the landlord can’t just use that to cover the missing rent.

Using the security deposit towards last month’s rent is only beneficial to the tenant. It is rarely, if ever, benificial to the landlord.

Is Using a Security Deposit Towards Last Month’s Rent Illegal?

Is Using a Security Deposit Towards Last Month's Rent Illegal?

Many states have very strict laws about how the security deposit should be held and used.

In states like North Carolina and California, the law specifically states that the security deposit cannot be used as rent.

In other states, there are laws that specify how landlords are to treat the security deposit with deducting damages.

Landlords that live in states where there are no specific laws about using the security deposit towards last month’s rent should create their own policy for their business. It should appear in the lease agreement as a clear outline of what the tenants should expect.

All in all, it’s never a good idea to use the security deposit as the last month’s rent.

RentPrep’s Take On Using a Security Deposit Towards Last Month’s Rent

Landlords must understand the importance of the security deposit. Then they will be reluctant to use it for anything but what it is designed for. That includes the last month’s rent.

Landlords hold security deposits as insurance against damage to the rental property. Giving up the security deposit in the form of “rent” means that if there is damage, the landlord will have a hard, if not impossible, time collecting from the former tenant.

Landlords can get into legal trouble if they don’t process the security deposit according to their state law. In states without specifics, they are putting themselves in jeopardy as well.

Keep rent separate from the security deposit in every way. Landlords will protect themselves and their financial interests.

What Are Other Landlords Saying About Using a Security Deposit Towards Last Month’s Rent?

Of course, each individual landlord should set up security deposit conditions that are compliant with the law and best for their rental property.

Here’s a screenshot of landlords discussing this question in our private Facebook group for Landlords.


using security deposit towards last month's rent

You can see even more comments on that post by checking it out in the group.