22 Aug How Much Security Deposit do I request as Landlord?
The Security Deposit you request from tenants secures the protection of your rental investment. Therefore, it is vital to ensure that the deposit is a considerable enough sum to adequately protect your property. Make sure that you, the landlord or your rental agent accurately estimate the level of damage deposit your property requires.
Historically, a one-month security damage deposit norm proved generally sufficient in covering damages left by the tenant and the costs of restoring a property to the condition it was at commencement. However, in today’s volatile economic times, with average tenants spending a significant portion of disposable income on rent and more defaults than ever, anything less than two months’ security deposit leaves you at risk of financial loss in the event your tenant defaults on their last month’s rent or leaves the property with extensive and costly repairs.
A scenario recently faced by a client, where the tenants had divorced, resulted in the tenants giving notice to vacate, with one spouse moving out prematurely. The consequent financial upheaval meant they did not pay the last month’s rent. Despite the lease prohibiting this and the tenants receiving notice of the breach with impending legal action, they still did not pay the rent. The last month’s rent was thus deducted from their security deposit (1.5month’s rent).
Unfortunately, within that last month of their lease, the remaining tenant left the property in a despicable state. With only half a month’s deposit remaining to restore all the damages, the landlord was left paying towards damages and the consequent legal costs and efforts to recover the funds. This proved a futile waste of time and money. A higher deposit would have remedied this situation.
It is advisable to make deductions off deposits for damages first and to take legal action in the recovery of the outstanding rental as a material part of the lease.
One must always ensure higher deposits, as in this scenario, despite the tenant being exemplary over a two-year period, the demise of their personal relationship, resulted in severe delinquency. It is important to note that a tenant’s conduct and payment regularity can deteriorate swiftly, with hardly any evidence or warning thereof. Thus ensure that you allow yourself leverage, reduced risk and greater protection of your property through obtaining a higher security damage deposits.