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Security Deposits


System - Monday, December 9, 2019
Property Management Blog

SECURITY DEPOSITS

Security deposits are one of the most misunderstood items related to rentals.  They are highly regulated by the Florida Landlord and Tenant Statutes and are the number one cause of disputes between owners and tenant.
One of the misconceptions many owners fail to realize is that the security deposit paid by a tenant when renting a property belongs to the tenant.  Deposit money must be held in a Florida bank in a separate account not co-mingled with an owner’s personal account.  If a deposit account earns interest, the tenant is entitled to 75% of the interest earned unless they sign a waiver of the interest.  Most professional property management companies hold deposit money in a non-interest- bearing account to simplify the accounting and distribution of interest earned on security deposits.

It is also important in how security deposits are classified or the wording of the deposit in the lease.  If the deposit is called a rental deposit, it can only be used as rent.  If it is called a cleaning or damage deposit, it can only be used for cleaning or damages.  A deposit classified as a security deposit can be used for rent, damages, cleaning or most purposes providing the proper claims are made on the deposit after a tenant vacates a rental.
Don’t confuse deposits with fees.  Fees are normally not refundable and are commonly charged for pets, cleaning and processing.  Fees are normally disclosed in the lease and collected up front.  If a carpet cleaning fee is charged for $75.00 and it costs $100.00 to clean the carpets when the tenant vacates the additional $25.00 can not be claimed on the deposit.  Pet fees vary by size and number of pets and damages caused by pets are not limited to a fee or deposit.  There is usually a fee charged when a tenant submits an application for rent used to cover the cost of credit checks, background checks and processing.

The amount charged a tenant for a security deposit on the rental can vary greatly among owners and property managers. It is usually close to one month’s rent and it is important to make it consistent with the norm for the area.  If most properties in an area are charging a month’s rent as a deposit and you are charging double that, the tenant will likely rent the property with the lower deposit.  It is also important for owners to understand that the claim against a deposit and tenant can exceed the amount of the deposit and will likely have to go to litigation for resolution and collection.

Remember, security deposits belong to the tenant until they vacate a property and the proper claim is made against the deposit.  If there is no claim, a tenant’s security deposit must be returned within 15 days of the tenant moving out of the property and turning in their keys.  If there is a claim, it must be made in writing no later than 30 days from move out and the amount and description of what is being withheld must be disclosed to the tenant.  Tenants have the right to contest the claim within 15 days which can result in litigation.  Owners of rental property often fail to follow procedures with security deposits and find themselves in disputes with their tenants.  The improper disbursement of deposits can result in fines and penalties for an owner.  Be sure to use caution when dealing with a tenant’s security deposit.  

J. Matthew Scheel

Owner | Broker

Sundance Rental Management




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