Does a security deposit really provide that much protection to a landlord?

A traditional rental policy of collecting a security deposit in the amount as allowed by statute may help protect the landlord’s business to a great degree. The tenant has an obligation to take good care of the rental unit and pay rent as agreed in the lease contract. The tenant has a vested interest to uphold that obligation. The deposit is regarded as an incentive to the tenant to perform to his contract.

While the tenant is protected by statute regarding his right to a refund of that deposit upon his meeting the terms and condition of his lease, with the landlord having the right to deduct his financial losses in accordance with the state’s law if the tenant defaults.

The handling, accounting, and return of the tenant’s security deposit can be a source of conflict between landlord and tenant when the tenant moves out. The tenant is concerned with how soon he can get his money back while the landlord must be concerned that there is no property damage or unpaid rent by tenant before the landlord can prepare the accounting and return of unused funds.

All states allow a landlord to collect a security deposit when the tenant moves in and to hold the deposit until the tenant moves out. State landlord-tenant statutes regulate security deposit limits, deadlines for itemization and return of security deposits, and disclosure requirements. Since the security deposit is generally limited to an amount equal to one or two months’ rent, the landlord could suffer loss that cannot be fully covered by the deposit. It is then up to the landlord to pursue collection of funds or to initiate legal action against the tenant for the balance due.

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