Security Deposits Question

Discussion in 'Landlord & Rental Property Questions' started by Rainman, Aug 14, 2015.

  1. Rainman

    Rainman Senior Investor

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    I stumbled into something and just had to get clarification. Should the landlord place his tenants' security deposits in bank accounts where they'll earn interest? One tenant who had his security deposit refunded thought he'd been ripped off by his landlord when he didn't get the interest he believed his security deposit had accrued. Can a landlord be sued for that or are these the shenanigans of a bad tenant?
     
  2. crimsonghost747

    crimsonghost747 Senior Investor

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    First of all, with modern interest rates that security deposit (usually one months rent) would earn equal to pretty much nothing in interest.
    And the way I see it, it's the landlord's and he can do what he wants with it. And what ever he does with it, he pays the tenant back the amount that was deposited... nothing more or less.
     
  3. Corzhens

    Corzhens Senior Investor

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    Over here, the deposit is never a question because tradition says that the deposit is the insurance of the landlord. It's something like take it or leave it scheme. So when you rent a place, you have to be ready in parting with your money. However, the receipt for that deposit assures you of your bond with the landlord. And when you quit renting, that deposit will take care of any damages that you have incurred in the rented apartment or house. That's how things are over here with the so called security deposit.
     
  4. gracer

    gracer Senior Investor

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    I agree with @crimsonghost747. Once a tenant pays a security deposit, the landlord has all the right to do whatever he/she wants with it. After all, what does the tenant expect from the landlord, that he will just put the deposit in a secret place in his house and let it sit there for as long as the tenant is renting? What if the tenant stays for years? Of course the landlord has to use the deposit for his needs too. The important thing is for the deposit to be returned in exact amount once the tenant decides to leave. I honestly think this kind of demand is just one of the shenanigans of a really bad tenant.
     
  5. My401K

    My401K Well-Known Member

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    Interest? On what planet would that happen? No there is no interest involved unless the owner feels he wants to put it in an escrow account that is interest bearing which would be totally okay. But here is the thing with security deposits, at some point no doubt there could be a reason to actually use that money, be it from damage that was done to the unit or some sort of fine that could have been levied against the owner because of the acts of the tenant. Then the decision has to be made if this was enough to justify breaking the lease. Now that money is spent and gone.

    In that scenario if the owner decides that it was just one of those things, and the tenant is still okay they have to be prepared to either eat the cost if something else happens or be willing to follow thru with some sort of small claims issue if need be. The security is just what it says it is- security to cover minor damage, a deductible payment if major damage occurs that needs real insurance involvement or as just a financial reminder to the tenant that they have a financial stake in the agreement. As a rule I just evict if something occurs that was avoidable and causes damage that requires the use of the security deposit. I have been fortunate, but I have known other owners that have taken a hit from having an agreement with a poor choice of tenant.
     
  6. dianethare

    dianethare Senior Investor

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    Rightly said, that tenant just wants what's not his, his only entitled to his initial deposit, that's if he has kept the house in proper shape since moving in...speaking of security deposits accruing interests...which banks do that? Am interested...pass the word around :)
     

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