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The Complete Guide to Managing Tenant Security Deposits

As a property manager or landlord, there are many details of tenancy that you have to keep organized. Finances can be one of the stickiest aspects of landlord-tenant relationships, especially if the terms of your lease haven’t been clearly stipulated. 

One part of your lease agreement that should always be airtight, according to your trusted property management company in San Diego, is the security deposit. 

The Basics of Security Deposits

Essentially, a security deposit is a one-time sum that a new renter must pay to the landlord upon move-in as a form of insurance against any potential damage or rent deferral. The specific amount can vary, but most landlords ask for the equivalent of one or two months’ rent. 

Once the tenant moves out, the landlord must return the security deposit to the tenant in full unless any deductions must be reasonably made. This transfer of funds must occur within 21 days of move-out. If deductions have been made, the landlord is required to attach copies of any receipts and invoices that are connected to the deductions. 

What Can the Landlord Deduct For?

Tenants are responsible for turning their rental back over to the landlord in the same condition it was in on move-in day. Therefore, landlords can make deductions to the security deposit for any repairs or cleaning they had to pay for in order to return the rental to its previous state, minus normal wear and tear. 

Cleaning and minor repairs are the most common deductions that landlords will make to security deposits, as our team has seen firsthand in our extensive experience with property management in San Diego. Unpaid rent over the lease term can also be retroactively deducted from the security deposit. 

It’s important to note that landlords cannot deduct expenses based on normal wear and tear. Tenants can only be charged for damages that significantly decrease the value of the property. 

Tips for Handling Security Deposits From Property Management in San Diego

Now that you understand what security deposits are and the role they play in a landlord-tenant relationship, it’s helpful to look at a few of our top tips for handling this delicate situation. If you don’t properly manage your security deposit, it could cause serious issues for yourself and your tenant. 

Know the Laws in Your State

Some of the laws surrounding security deposits and tenants’ rights in this area are the same across all 50 states. However, each state will have slight variations regarding the enactment of the security deposit policy. 

For example, your state may require you to return your renter’s security deposit to them in a shorter time frame than another state. Make an effort to look into your state laws to ensure all of your financial policies are legal. If you’ve already done your research but it’s been a few years, don’t hesitate to look again to make sure the law hasn’t changed.

Don’t Undersell Your Security Deposit

The security deposit is a one-time payment and not paid monthly like rent and utilities. In response, our experienced team skilled in property management in San Diego has seen that many landlords and property managers choose to slash their security deposits by half or more. They do this in order to entice more potential tenants. 

You might be tempted to follow this example in a situation where you need to find a tenant quickly. However, when doing so, make sure you are aware of and understand the risks involved. 

Underselling yourself on the security deposit could connect you with renters who become a financial liability throughout the term of your lease. Even though it might make the tenant acquisition period longer, keeping your security deposit at a fair rate of one to two months’ rent is best. 

Keep the Security Deposit Separate

Landlords must not consider security deposits to be additional rent or personal income. It’s important to keep your tenant’s security deposit completely separate from other finances, even from the rent that the tenant in question pays you. This enables you to remove any risk of not having the full amount to pay back upon move-out day. 

Communication Is Key With Landlords and Tenants

Financial details like security deposits can often lead to disputes between tenants and landlords when the two parties don’t see eye to eye. Make sure to lead with open communication in every landlord-tenant relationship to avoid the risk of conflict and to keep both parties feeling comfortable.

Address: 4444 Mission Blvd Suite 140, San Diego, CA 92109.

Main Office: 858-943-0277

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