When renting your first apartment, you need to have a security deposit ready. Depending on what state you live in, your potential apartment may typically require a month's rent upfront. As long as you keep the apartment in good condition upon move out, you'll most likely get it returned to you.
As with all rental policies, it's helpful to know what to expect before you sign on the dotted line. We answer all of your frequently asked questions about security deposits, starting with: what is a security deposit?
A security deposit, usually the equivalent of one months' rent, is an amount you need to pay before you move into an apartment unit.
Why do landlords require security deposits? It protects landlords in the event that tenants cause damage to their unit beyond normal wear and tear or they fail to pay rent. Let's say your landlord has to repair a large hole you made in the wall after you move out, he or she will deduct the cost from your deposit, rather than charging you a separate fee.
Before you move in, you'll be required to sign the lease and hand over the security deposit in the form of a check or cashier's check.
This is where tenant state law comes into play. Most states require security deposits to be held in escrow accounts (or an account that is separate from the landlord or property management's regular business account), so your money never actually goes to your landlord. It prevents your landlord from being able to spend the money as she wishes, during the time you live in the unit.
For example, landlords in Massachusetts, Maryland and New Jersey must follow this rule. Once they put a tenant's security deposit into a separate bank account, they then need to provide a receipt that shows the bank where it is being held, along with the account's annual interest rate.
Also, if the security amount earns interest, some states require landlords to give that interest back to you when you move out.
Regardless of where your security deposit is held, it cannot be spent unless:
Otherwise, you'll most likely receive the security deposit within a set time frame after you move out.
Just like your first month's rent, you must pay your security deposit before you move in. Your landlord or property management company will most likely give you a checklist of payments before you move in and the security deposit will be one of them.
Getting your deposit to the landlord in a timely manner may affect whether or not you're able to secure the apartment.
The security deposit amount is typically equivalent to one month's rent.
However, it could vary, depending on:
Having good credit, in general, is important when renting an apartment. If you have a low score, your landlord may ask for a higher amount for the security deposit. If you have a high credit score, they may ask for less.
Your credit score shows landlords how responsible you've been with your finances. A great score demonstrates that you've made timely payments for your loans and credit cards and none of your financial accounts have gone to collections.
Some landlords and property management companies have a minimum credit score that potential renters need to have in order to apply for a unit. You may see these requirements if you're looking to rent in a competitive rental market, such as San Francisco, Los Angeles or New York City.
It's crucial that you check your credit score before you start looking for an apartment. If you need to raise it, it'll take time. Give it at least three to six months before applying for apartments. It will give you a better chance of being able to rent something without having to pay extra in the security deposit amount or getting rejected altogether.
As with many rental laws, the security deposit amount may depend on where you live.
New York state law, for example, doesn't set a maximum deposit amount that a landlord can collect. California law limits security deposits to:
Most states will likely fall somewhere within one to three months' worth of rent, although landlords can always choose to charge less. If your credit is not in good shape, though, your deposit may be closer to your state's limit.
In general, security deposits are refundable — minus the cost of repairs or missed rent.
One caveat to refundability: Some landlords may require a non-refundable move-in fee in addition to or as part of your total deposit. This amount may cover the costs for the application and screening fees, as well as cleaning fees. This is less common but always read your lease carefully so you know what fees are involved.
A security deposit and last month's rent are not to be confused. Let's say you've lived in the apartment for a year and ready to move out in September. You give the proper 30 days' notice to your landlord and tell her to use the security deposit as September's rent. She will come back to you and say that won't work.
September's rent needs to be paid just like all the other months you've lived in the apartment, although it may be prorated, depending on when you decide to move within the month.
Also, keep in mind that if the landlord ends up raising rent, the amount of the security deposit will also be increased. This means you'll need to pay the difference in raised rent for it.
This depends on what state you live in, but you can generally expect to receive the balance of your deposit within 30 days of moving out of your unit.
Some states require landlords to return deposits within 15 days or as soon as they receive a tenant's forwarding address.
Check your state's laws so you know your rights. If your landlord withholds your deposit past the legal time limit, you may be able to send a letter or notice. In general, it makes sense to submit a formal request for your deposit along with your new address.
According to a Rent.com survey, 26 percent of renters don't get their security deposit back when they move, and 36 percent of those renters receive no explanation from their landlord.
Here are the reasons why a landlord would not return the full amount of your security deposit:
To avoid any conflict, take good care of your unit and leave it in the same condition at the end of your tenancy. Make sure to do the following before you move in, while you live in the apartment and after you move out so you can get your security deposit returned to you.
It's understandable that accidents or mistakes happen that can damage a property. Just make sure you notify your landlord right away and keep the lines of communication open.
Keep a digital record of anything that has to do with the apartment. It's a good idea to gather all of your emails, texts and dates and times of when phone calls in one place.
Accurate records of your stay may help you get all of your security deposit back, as well as avoid problems with your landlord or management company.
Understanding the rules ensures there are no big surprises come move out time.
Claire Tak is a writer who previously served as head of content and chief editor for FinTech companies in New York and San Francisco. Her work has appeared on FOX Business, Bloomberg and Forbes. She writes regularly about travel, money and being a good human. Traveling and snowboarding are her two favorite things to do.