Signing an apartment lease is much more than just inking your name on a piece of paper. The process involves a decent amount of paperwork, an application fee, first and last month’s rent (if applicable), and something called a security deposit.
The security deposit can be a mystery, causing potential residents to question its purpose. Here’s everything you need to know regarding the infamous security deposit and how it fits into your lease experience.
Security Deposit: What is It?
A security deposit is the payment a new resident provides his or her landlord or property management company, along with other advance rent payments. In simplest terms, it’s a financial cushion that protects the apartment unit in the event of unpredictable damage or a resident’s failure to pay rent in a given month.
Security deposits are refundable, and if you keep your unit in good shape, you’ll likely receive money back at the end of your lease. As you’re budgeting for your new place, just make sure to incorporate the security deposit in your one-time initial costs before moving in.
Factoring the Cost of Security Deposits
A security deposit fee varies by community and resident, so it’s a little unpredictable. It will be different based on:
- Where the property is located: Not all states have a required cost limit, making it possible for the deposit to be as high as three months’ rent or as little as $100.
- If you have pets: You’ll have to factor in more to the deposit in case your furry friend leaves a mess behind.
- If the apartment is furnished: A furnished apartment will always require a more costly security deposit.
- Your credit score: Landlords and management companies can access this information and use it to determine your level of risk as a resident. The lower your score, the riskier you are. That means the pricier the deposit.
Make sure to check your credit score before starting the application process. That way, you’ll know where you stand and how it compares to the cost a community manager presents for your deposit. As you’re calculating one-time expenses overall, keep in mind that there will be other fees besides the security deposit – an application fee, pet fee, general move-in fee, etc. Paying each with separate checks or electronic transfers will help you stay organized.
The Journey of the Security Deposit
Before moving in, you’ll receive a checklist of fees and payments to make before you can sign for your unit. Because it’s not quite a “sure thing” that the unit is yours at this point, it’s very important to pay your deposit on time.
From there, the deposit is held in a bank account that remains separate from the landlord’s or property management’s business account. If the bank account is one that gains interest, the tenant may be able to obtain those earnings when the deposit is refunded. This varies depending on the state, with some allowing the landlord to retain those earnings from the interest.
Your security deposit is safe in the account, and the only way it can be spent is if appropriate circumstances call for it – damage to your unit is beyond typical wear and tear. That’s why it’s important to fill out the move-in checklist accurately and in detail so that you aren’t charged for any damage that was already there upon move-in.
When you receive your refund after you move out depends on where your property is located. The time period can range from 14 to 60 days after you leave. Don’t be surprised if you see small deductions from your deposit. Sometimes, when an apartment isn’t in the best condition and also not in the worst condition, there will be deductions for noticeable damage.
If there are deductions on your security deposit refund, you should receive documented reasons for them. The documentation should include:
- A list of damages and their severity
- A list of repairs to the damage
- Written evidence of estimates, bills, invoices, or receipts, with the cost of the repairs
What is Covered by a Security Deposit?
It’s not easy to list everything that would be covered by a security deposit because there are so many types of damage that could take place. So, here’s the simplest way to look at it: A security deposit covers damage that the tenant themselves has created. This means damage that you, your child, your pet, your friends, or other tenants in your unit have created.
Repairs for any damage that was out of your control – maybe from a natural disaster – will come out of your landlord’s or property manager’s insurance. The damage only applies to the structure of the apartment (walls, windows, floors, etc.). Meanwhile, you want to make sure you have renter’s insurance, something that is often required and will cover damage to personal belongings due to a natural disaster. Security deposits do not cover incidents of theft or fire, so these are other cases in which renter’s insurance saves the day.
If You Have a Roommate
Many people wonder if they can share the security deposit with their roommate. The answer, unfortunately, is no. Since security deposits are dependent upon credit scores, and you both will have different ones, each person must pay a security deposit, separately. If your roommate causes damage that one security deposit will not cover, the property manager might have to dip into the other deposit as well. Just keep this in mind as you’re choosing roommates, and make sure you’re both on the same page.
When in Doubt, Ask Questions
The cost and conditions of a security deposit can vary from state to state and property to property, but having a base knowledge of what it covers gives you a decent foundation. Always ask questions if you’re not sure about something, and do your due diligence when it comes to documenting existing damage before moving in.