Every landlord on the planet knows the benefits of requiring a tenant to pay a security deposit when they sign a lease agreement. Though that is common knowledge, there are a few facts about security deposits that many landlords know little about. For example, are you collecting? Have you placed your deposits in a trust account? Do you know your local laws about security deposits? It is important that you do.
Why We Collect a Security Deposit
A security deposit serves to protect the landlord from any damage the tenant causes to the unit. If the tenant leaves the apartment in a mess and the landlord must pay to have the unit cleaned, the security deposit will cover that. If the tenant forgets to return the keys, the security deposit will cover cutting replacements and rekeying the locks. It also is available to reimburse the landlord for any back rent owed by the tenant at the time they move out.
How Much of a Security Deposit Can You Charge?
If you were to poll 100 landlords, most would answer that question by saying “one month’s rent.” While that is true in most states, it is not true in all of them. In fact, each state has the legal right to set their own rules and regulations governing landlords and tenants. In some states they allow a higher security deposit – which is great for a landlord.
In North Carolina, for example, a landlord may charge a tenant two months’ rent for a lease that is longer than two months. If you are only collecting one month’s rent, then you are shorting yourself. If you allow pets, North Carolina allows you to charge a non-refundable “reasonable” pet deposit in addition to the standard security deposit.
Landlords, did you know that North Carolina laws governing security deposits requires that you notify the tenant of the name and the address of the bank where the security deposit has been deposited. This notification must occur within 30 days of the beginning of the lease. You must deposit it in a trust account or post a bond.
When Do You Have to Return the Security Deposit?
Under North Carolina’s Landlord/Tenant laws, a landlord must return the tenant’s security deposit within 30 days from the date the tenant vacated the unit and they must include an itemized list of the deductions. If there was extensive damage that cannot be accounted for within 30 days, the landlord must send the tenant a final accounting within 60 days.
Allowable Security Deposit Deductions
Landlords are allowed to charge tenants for any costs they incur that are necessary to restore the rental unit to the condition it was in prior to when the tenants moved in. A landlord may not charge a tenant for normal wear and tear.
This would be classified as normal wear and tear:
- Minor marks or dings on the wall.
- A rug worn thin in high traffic areas.
- Fading from sunlight
- Mineral build-up
- Pealing linoleum near the shower or sink
- A small stain on the carpet
- Dirty tile grout
- Loose door handles
On the other hand, the landlord is entitled to reimbursement if there are:
- Cigarette burns
- Large holes or marks on the wall
- Tears in the carpet
- Pet stains
- Broken windows or mirrors
- Water stains caused by open windows
- Stopped up toilet
- Extensive filth and dirt
Landlords can also keep the portion of the security deposit that covers the cost of unpaid rent or utility bills. If the tenant breaks the lease early, you may keep the costs to re-rent the unit. If you paid court costs to process their eviction, that may also be subtracted from the security deposit.
There are a few other details that concern security deposits. One way to help reduce the chance that you will be stuck with a larger bill than the tenant’s deposit is by collecting the largest security deposit allowed by law which in North Carolina is two months’ rent.
If you’d like to discuss more options for having a professional manage your rental property contact us here and we can provide a cost quote, or virtual rental evaluation to nail down potential income.