Property management & leasing
Security Deposit: Definition & Example
What Is a Security Deposit?
A security deposit is money a tenant pays a landlord at the start of a lease, held to cover unpaid rent or damage beyond normal wear and tear when the tenant moves out.
What does security deposit mean?
The security deposit protects the landlord against losses the tenant causes. After move-out, the landlord may deduct amounts for unpaid rent, cleaning to restore the unit to move-in condition, and damage beyond ordinary wear and tear. The rest must be returned.
Security deposits are heavily regulated at the state level. Rules commonly cover the maximum amount (often one to two months’ rent), whether the money must be kept in a separate or interest-bearing account, the move-in inspection or condition checklist, and the deadline for returning the deposit with an itemized list of deductions, often 14 to 45 days.
A security deposit is generally not the tenant’s last month’s rent unless the lease says so. Landlords who miss the return deadline or make improper deductions can owe penalties in many states.
Security deposit example
A tenant pays a $1,800 security deposit on a $1,800 per month apartment. At move-out, the landlord finds a broken blind ($60) and a carpet burn that requires patching ($240). The landlord sends an itemized statement within the state deadline and returns $1,500.
Related terms
- Holding DepositA holding deposit is money an applicant pays to take a rental unit off the market while their application is processed or until the lease is signed.
- Move-In InspectionA move-in inspection is a documented walkthrough of a rental unit at the start of a tenancy that records its condition, usually with a signed checklist and photos.
- Lease AgreementA lease agreement is a contract between a landlord and tenant that sets the rent, the term, and the rules each side must follow while the tenant occupies the property.
- Pet RentPet rent is a recurring monthly charge added to a tenant’s rent for keeping a pet in the unit, separate from any one-time pet fee or pet deposit.
- Rental LedgerA rental ledger is a running record of every charge and payment on a tenant’s account, including rent, fees, credits, and the resulting balance.
Security deposit FAQ
- How much can a landlord charge for a security deposit?
- It depends on the state. Many cap deposits at one to two months’ rent, and some have no cap. For example, Michigan limits deposits to one and a half months’ rent.
- What can be deducted from a security deposit?
- Typically unpaid rent, cleaning beyond normal use, and damage beyond ordinary wear and tear. Faded paint and minor scuffs from normal living usually cannot be deducted.
