Obtaining a security deposit is one of the most important things a landlord can do before renting out their Howard County property.
In fact, those that do not require a security deposit from their tenants often face many costly expenses when their tenant moves out. Unfortunately this leaves the landlord responsible for damage to their property, among other things, that they were not at fault for.
Seems unfair right?
That is why understanding the importance behind collecting a security deposit is essential to being a landlord.
Today we will explore the top 5 reasons you should procure a security deposit for your rental home as a way to protect yourself from unnecessary expenses.
What is a Security Deposit?
When dealing with a rental agreement, a security deposit is a lump sum of money paid upfront by your tenant before their move-in date.
This deposit ensures that the cost of any damage that has been discovered at the end of the lease agreement will be paid for.
As long as the tenant abides by the terms of the signed lease agreement, this deposit should be returned to the tenant when the lease has expired.
It is important to be aware that a security deposit is in place to safeguard the landlord from damage the tenant may have caused, though tenant’s have rights regarding the return of their deposit.
At the end of a lease agreement, the landlord is only entitled to the security deposit, or a portion of it, if there are actual damages that need compensation. Please be sure to check with the different laws regarding security deposits in your area to avoid any landlord-tenant conflict.
Top Reasons a Landlord Should Collect a Security Deposit
As noted above, a security deposit protects landlords against a variety of damages that can occur to the landlord’s rental property. Let’s take a look at the top 5 reasons you should strongly consider requiring a security deposit for each property you lease.
Protection Against Damage to the Premises
To avoid paying out of pocket expenses to fix physical damage to your rental property, collect a security deposit that can be used to repair these issues.
This consists of expenses to cover damage by the tenant or the tenant’s family, agents, employees, or guests to your rental home, and includes surrounding areas, major appliances, or furnishings owned by the landlord.
This may be especially helpful in places such as Columbia or Elkridge. These regions of Howard County are known for being great places to raise families. This means longer tenancy stays and an increase in the likelihood that your rental property will encounter some physical damage beyond normal wear and tear.
Keep in mind that property damage is different than normal wear and tear. This deposit is not to be used as a way to renovate or upgrade any furnishings, appliances, or cosmetic looks of the home, and must only be used to cover the cost of repair.
It is also required by law that you provide the tenant a list of damages including the costs required to repair those damages in order to justify keeping the security deposit.
Early Termination of Lease
Should your tenant break their lease early with or without proper notification per the signed lease agreement or simply abandon the property, you are entitled to use the security deposit as a way to recover your losses associated with this breach of contract.
If you have an early termination clause built into the signed lease agreement you will have to abide by those terms, as well as any relevant state and local laws, should you wish to keep all or part of the security deposit.
In addition, should legal action be required due to this breach of contract, you may be entitled to use the security deposit to cover your legal fees as well.
The security deposit will help to cover the necessary preparations required to rent out your property to new tenants, the cost of advertising a vacant rental, and the loss in rent that you will incur.
It is important to note however, that once another tenant is placed in your rental home, you can no longer use the security deposit as a way to recoup lost rent.
Non-Payment of Rent
Similar to a tenant terminating their lease agreement early, a security deposit will help you cover your loss in rental payments should a tenant simply stop paying altogether.
Most states will allow you to keep all of the security deposit you collected at the start of tenancy should this situation occur.
Unfortunately, if the tenant still resides in your home, even after non-payment of rent, you will then be forced to take more serious action such as beginning the process of eviction.
Excessive Cleaning Costs
It is generally understood, and is usually outlined specifically in a solid lease agreement, that upon move-out your tenant will leave your rental home the same way they found it when they moved in, less some normal wear and tear.
Unfortunately, in places such as Laurel that boast long-term tenancy potential, your tenants may not be able to restore your rental home to the way it was upon move-in after years of leasing your property.
This is where a security deposit comes in handy.
Not to be confused with general cleaning costs associated with being a landlord and having a rental business, this use of the deposit is for extreme cases of uncleanliness, should the need arise.
Unpaid Utilities Upon Move-Out
One issue that often goes overlooked is the transition of utilities between landlord and tenant.
During the lease term your tenants will have most, if not all, utilities in their name. However, when the lease comes to an end, and your property becomes vacant, the utilities will then be switched over to your name again.
Should a tenant fail to pay the last months’ worth of utility bills, you are entitled to use the collected security deposit to cover those costs.
In the end, it is advisable to have a security deposit collected at the start of each lease agreement for your protection in the future.
Whether a tenant excessively damages your home, breaks the lease agreement early, or even just disappears, it is helpful to know that some of your losses will be recovered.
Consider using Bay Management Group to help you take care of things such as thorough lease agreements, the collection of security deposits and rental payments, and the inspection of your home so that extreme cases of damage do not have time to surface.
With their highly trained team being knowledgeable in all of Howard County’s laws, you will have the peace of mind that the lease properly addresses security deposits and that the use of one, should the need arise, will be done in good faith.