Security deposits can be one of the primary solutions to the mistreatment of the agreement by your tenant, so it’s paramount to understand the ins and outs of the security deposit to be in accord with the law. The security deposit may not exceed two months’ rent and must be deposited in a bank, savings or loan association, or credit union which is insured by a federal government agency. The funds may not be mixed with the landlord’s personal accounts, and any interest earned on the deposit during the first 5 years of tenancy belong to the landlord as a sort of administrative fee.
The landlord may only use these funds for specific circumstances, as follows:
- To remedy the tenant’s non-payment or insufficient payment of rent or any other funds due to the landlord.
- To restore the premises to its condition as it was at the beginning of the tenancy, except for ordinary wear and tear.
- To recover expenses incurred in acquiring possession of the premises from the tenant who does not act in good faith in failing to surrender and vacate the premises upon noncompliance with the lease terms and notification of such noncompliance pursuant to law.
Finally, at or prior to move-out, the tenant should provide a forwarding address. At the tenant’s failure to provide a mailing address or any forwarding instructions to the landlord within a year after the termination, the security deposit shall revert to the landlord, and the tenant will have effectively forfeited all rights to any portion of the security deposit. Within 30 days after tenancy termination, the landlord should send all of the security deposit or a portion of it with an itemized list recording any deductions from the full amount, particularly specifying the nature of any damages to the premises. If the landlord fails to provide a written statement within 30 days of termination, he or she forfeits all rights to withhold any portion of the security deposit. Any bad-faith withholding by the landlord shall result in punitive damages not to exceed two times the monthly rental payment in addition to actual charges.