Everything you need to know about rental deposits
Have you ever wondered why tenants are compelled to pay a security deposit? Or what the whole notion of deposits is actually all about? In a nutshell, deposits are put in place as a security mechanism to protect landlords against damage to the property. In addition, rental deposits are extremely important to safeguard landlords from unpaid bills. From the tenant’s perspective there are some things you need to be aware of. Chiefly that you will need to pay a deposit before occupying a property. As such ensure that you put enough financial resources on the side to cater for all these obligations. In most instances’ tenants are expected to pay up to three months’ rent as a deposit. Thus, you must have sufficient money saved up before you even begin looking for a rental property. We have compiled everything you need to know about rental deposits.
Why is a rental deposit essential?
For the purposes of protecting landlords against unpaid rent, it is important for tenants to pay a rental deposit. Moreover, the same deposit can be called upon for the purposes of covering any damages. Additionally, the deposit covers breakages caused to the property by the tenant. Items in the property when the tenant moved in and are now missing are also covered by the deposit. In the event that there are rental related expenses that are outstanding, the deposit can be called upon to cover them.
How much should the rental deposit be?
Although there is no actual set amount, in most cases landlords charge up to three month’s rent as a deposit. Keep in mind that the higher the deposit amount the more you are likely to put off a lot of potential tenants. You may also consider implementing a higher deposit in the event the rent amount exceeds one third of the tenant’s income. Other circumstances that may convince you to demand a larger deposit include; the tenant not having a stable income or having several other financial commitments.
When do rental deposits get returned?
If everything is in order then the landlord should return the deposit amount to the tenant within the shortest time period. Usually this reimbursement of the deposit occurs within a week of the tenant moving out. Under circumstances where a landlord has to make deductions from the deposit to cover the cost of repairs for any damage, then the balance has to be repaid to the tenant within two weeks. In some circumstances, the landlord has to hold a potion or part of the deposit to cover any outstanding costs related to rental issues.
What are the landlord’s obligations?
One of the most important obligations that a landlord will have is to securely keep the deposit in an appropriate account. I always advise landlords to consider keeping the rental deposit in an interest earning bank account. It is of the greatest importance that landlords adhere to this otherwise it could lead to complications and arguments down the line. At this juncture the property condition checklist comes in handy. As such the tenant must sign this checklist to confirm the condition of the property.
Use the same checklist to assess and confirm the condition of the property at the time of the tenants exit.
Considerations before paying a deposit
Be absolutely certain about the property you intend to move in prior to paying the deposit. This is because once you’ve signed the lease and paid the deposit then you’ve made a massive commitment. As such be certain about the property before signing the lease agreement. Remember that anything above a third of your salary is beyond your means. And therefore the rental property might not be the right fit for you.