As a property management professional I believe security deposit procedures are an area of the rental business where landlords most often make mistakes.
How much should you retain as a security deposit?
Once you have performed a background check and you have determined the prospects meet your stated criteria you can begin discussing security deposits. Typically security deposits range from a nominal fee, i.e. $500 through to a factor of the monthly rental amount. At Gulf Coast we recommend that landlords collect at a minimum a security deposit. We collect a deposit equal to one month’s rent and even more if the tenant’s credit is not stellar.
Collecting a Security Deposit
When you collect a security deposit it is critical that you understand your legal responsibilities as the guardian of these funds. Firstly, contrary to popular belief this money belongs to the tenant at all times. Security deposits should not go towards rent, used for maintenance or commingled in any way. Secondly, it has to be kept in a separate Florida bank account and should be available at any time. Lastly, if the account is an interest bearing account then the tenant is entitled to 50% of any interest accrued during the lease period.
Once the tenants have vacated the property you will need to assess whether any claims can be made on the security deposit. Claims can include damages, unpaid rent, attorney fees and any mandatory charges that were specified in the lease.
Most of the charges are self explanatory however the area where most owners fall foul is charging for damages. Determining what to charge is not an exact science and opinions are always subjective. You should always use your move in inspection and interim inspections as your baseline. In which you can compare these inspection reports to the condition of the property when the tenants leave.
Any obvious and major damages which require repair and/or replacement can generally be claimed quite easily. The difficulty comes in determining what constitutes fair ‘wear and tear’. In my experience most tenants believe everything is wear and tear. Whereas most owners do not believe in wear and tear. The judge would ultimately make the decision. So my advice is always to apply charges fairly, using all the documentary evidence that you have at your disposal.
Landlords should also be aware that just as the property and fixtures are depreciable in terms of claiming taxes they also lose their replacement value over time. For example a common formula applied to carpets is a 7 year life. Therefore if a tenant damages a 3 year old carpet you will only be able to charge 4/7 of the replacement value.
Once the tenants leave you have a set amount of days to make claims on the tenant’s deposit. Claims should be done via certified mail. It must contain specific language as specified in Florida Statutes. Failure to perform this procedure in line with the law will result in your claim becoming invalid. You will need to return the entire security deposit.
If you have any questions regarding the security deposit process please contact us at (941) 782-1559 and we will be happy to provide you will our professional opinion.
Finally, I hear many landlords state that they collect "first month’s rent last month’s rent and a security deposit’. This is a practice most management professionals would avoid at all costs. Please contact me to find out why at (941) 782-1559.