How to Handle Security Deposits

Today we’re talking about security deposits. Security deposits are important because the one thing that can get a real estate broker or an owner who manages his own property in trouble is the improper handling of the security deposit. The most important thing to know is that it’s not your money. You cannot spend the security deposit from a tenant as if it’s your money.

There are a lot of misconceptions about security deposits and what an owner can or cannot do. No security deposit can exceed three times the periodic rent. Sometimes, property owners and brokers like to think they can penalize a tenant and they think the security deposit is the best way to do that. But, that’s not true. The security deposit has to be accounted for completely. If it’s not going to be returned, you have to state why and you have to provide receipts for work that was done to the property with those funds. All deductions have to be documented.

Reasons that deductions may be allowed from a security deposit include: to remedy any default in the payment of rent; having to re-key the property because a tenant didn’t return the keys; to clean the unit if the tenant left a mess; and, to repair any damages that go beyond regular or normal wear and tear. You cannot deduct from the security deposit to pay for a real estate agent or a property management fee, or to pay for advertising expenses. If a tenant breaks the lease and you have to hire a real estate agent to find another tenant, you may be able to keep some of the deposit. However, hiring a property manager and paying to advertise the property is of no concern to the tenant and it cannot affect the security deposit. Also, you cannot charge the tenant for breaking the lease unless there are penalties explicitly stated in that lease.

Finally, remember that you need to return the security deposit to the tenant in a timely manner. You are legally required to return that deposit within 30 days. If you’re not returning the whole deposit, you must submit an accounting of what you withheld within those same 30 days. If you do not do this, you have to return the whole security deposit. You don’t want to find yourself in court, liable for trouble damages which can be three times the amount of that security deposit. Don’t try to contract your way around the law, either. You cannot give yourself 60 or 90 days to return the security deposit in the lease.How to Handle Security Deposits

If you have questions about security deposits, please contact us at Blackbird Realty and Management in Las Vegas.


2 Responses to “How to Handle Security Deposits”

  1. Bob Mack August 20, 2014 12:42 pm

    It is great learning how others in different areas handle their security deposits. Glad that you mention a few ways that a deduction can be made as well as emphasizing the legal ramifications if one is careless. I have a blog on the same topic it will be great if you check it out and let me know what you think! Good luck in Las Vegas.

  2. Jeremy Tallman September 8, 2014 12:39 pm

    I find it great to see how other property managers in the area handle the security deposit process. For example I didn’t know that in Nevada you have to turn in the security deposit in 30 days. Anyways if your interested how things are ran in Indianapolis feel free to check out my post at