What Is a Security Deposit?
What Is a Security Deposit? A sum of money is given as a security deposit to ensure access to goods or services.
Definition and Examples of Security Deposit
A security deposit, in its broadest sense, is money you give to someone else in exchange for the use of their property or services. When referring to rental properties, a security deposit definition that is more detailed is utilized.
A security deposit is described by the American Bar Association as “funds to safeguard the landlord in case the tenant damages the property or fails to pay rent.” Before you move into an apartment that you are renting or leasing, the landlord may request a security deposit. This may be limited to one to two months’ rent, depending on your location and local landlord-tenant legislation.
In the event that you break the terms of the lease, need to be evicted, or damage the property, security deposits provide landlords with some financial security. The landlord may retain your deposit if permitted by your lease agreement, in order to make up for any losses or damages they suffer financially as a result of your activities.
However, a security deposit isn’t always required when renting a home to live in. A security deposit may also be required for:
- Secured credit cards
- Cellphone services
- Cable TV and internet services
- Utility services
- Tuition and other higher-education expenses
- Car rentals
- Vacation rentals
- Moving-truck rentals
How a Security Deposit Works
Before granting entry to the property or providing the requested services, a security deposit is typically demanded. Therefore, you might have to pay the security deposit in full when you sign the lease if you’re moving into a new apartment, for instance. Or, if you’re going to college, you might need to pay a tuition deposit before the semester begins.
Landlord-tenant rules at the state and/or local level often cover security deposits for rental agreements. These statutes may require:
- How much a landlord is allowed to charge for a security deposit
- When security deposits must be paid
- Where this money must be held
- Under what circumstances a security deposit can be returned and the time frame for doing so
- When a landlord can keep a tenant’s security deposit
For instance, if you leave behind discolored carpets or broken fixtures when you leave an apartment, your landlord may be permitted to keep all or part of your security deposit to cover cleaning and repairs. Alternatively, if you leave your lease early, you may forfeit your deposit to cover any remaining rent payments due.
Laws governing landlord-tenant relationships may also outline your options for recovering your security deposit. For instance, if you think your landlord is withholding your deposit illegally, you might be eligible to bring a civil complaint in small claims court.
Security deposits can also be utilized to make up for other kinds of financial losses. Your service provider may add the deposit to your balance if, for instance, you stop paying your electric or cellular payment. You might also use the security deposit to cover repair costs if you damage a vehicle you rented, like a car or a moving van.
Do I Need to Pay a Security Deposit?
In most circumstances, the landlord will need a security deposit if you’re renting an apartment or another type of residence. If you don’t have the cash to put down a sizable deposit upfront, you might be able to negotiate an alternate deal. You might be able to spread out the deposit over the first three months of your lease, for instance.
Depending on the service provider and your credit score, you could be required to put down a security deposit for utility and cellphone services, a vacation rental, a moving truck, or a rental automobile. If you previously had service with a utility company, for instance, and you always made your payments on time in the past, they might waive the security deposit. You may need to provide a letter of credit to have a security deposit waived in this way.