Security Deposits

A security deposit is an amount of money paid by a tenant to his/her landlord; held by a landlord, a security deposit is still the property of the tenant.

A landlord will hold a security deposit, in order to make sure damages are covered, that a tenant pays his/her rent, as well as the utilities, if not provided.

Once a lease is terminated, a tenant has the right to have the entire security deposit returned, unless, the landlord can substantiate a claim to it because a tenant:

• Owes unpaid rent
• Owes unpaid utility bills; or
• Caused damage to the rented property beyond reasonable wear and tear.

Understanding the duties as well as taking action is very important. The law requires mandatory notices, written communication/mailing, as well as upholding time limits. If the duties are not carried out precisely, a tenant risk losing his/her security deposit; conversely, a landlord may lose his/her claim to it as well.

What exactly is considered a security deposit?

Any prepayment of rent and any refundable fee/deposit are considered, by law, to be part of the security deposit.

Occasionally a lease requires that both the first and last month's rent be paid prior to a tenant moving in. In this case, the last month's rent is considered a security deposit. In addition, sometimes additional fees such as for credit checks, pets, keys, cleaning, as well as mailboxes and/or storage. While, in the lease, these fees may not be stated as 'security deposits', if they are refundable, then they are, under law, considered security deposits – meaning they are protected by the same rules and laws.

After collecting a security deposit, what must a landlord do?

After collecting the deposit, a landlord has options; however, they are limited to:

• Depositing the money with a bank/regulated financial institution or;
• Depositing a cash bond or surety bond, in order to secure the entire deposit with the Secretary of State. (If a land lord chooses to do this, he/she is able to use the money at any time for any purpose) 
  - The bond is assurance that the money will be available to repay a tenant if necessary.

Who does the security deposit belong to?

The security belongs to the tenant until the landlord establishes a right to it.