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NYC is a big rental market. Almost, two-thirds of the local population lives in rental apartments. Therefore, authorities have enacted effective legislation to protect the benefits of both parties: landlords and tenants. On one end, you see rules such as a warranty of habitability to protect the basic rights of tenants, and on the other hand. There is a mechanism of the security deposit to protect the property from potential damage inflicted by the tenant. This is the beauty of the local system that there is a check on everybody.
While the name may have illuminated you already but there is a lot of technicalities that go into the security deposit. Let us get to them one by one:
It is an amount that tenant is supposed to submit to the landlord when signing a lease. The purpose of the security deposit is to protect the landlord from potential losses.
There could be two types of losses. One, if the tenant does not pay the rent so the landlord may cut the rent from the security deposit. It especially happens during the last month of the lease that tenants stop paying rent so the landlord does not have to worry much as an amount equal to or more than monthly is already with the landlord.
Read Also: Negotiating Rent with Your Landlord
Second, if there is damage inflicted to the property by the tenant, intentionally or unintentionally, the landlord may use the security deposit to get it repaired. It especially is the case when a tenant leaves the property; he/she refuses to get broken things fixed. Now landlord has a backup so the landlord does not have to incur any loss.
The best practice is, however, that tenants get things fixed and settle every month’s rent and towards the end of the lease, the landlord returns the security deposit to the tenant.
It makes tenants careful and pushes them to be responsible towards the property of the landlord or else they are bound to face the music for their mistakes.
The big question in the whole debate of security deposits is how much is enough or how much a landlord may ask from the tenant as a security deposit? It is a negotiable question and depends on a host of factors.
What Are Those Factors?
Security deposit depends on the location and varies from state to state and area to area. There are different sets of rules in different cities for the security deposit. In NYC, for a rent-regulated apartment, the security deposit cannot be more than one month’s rent. While California State allows a security deposit equal to two months rent.
Name a thing where you plan to purchase and your credit score does not matter? Certainly, you would not find any. Your financial history is a constant which derives many outcomes. In the case of the security deposit, credit score holds equal importance as property management or landlord often takes a decision based on the credit score. The higher the credit score, the lower you would be required to pay as a security deposit.
At some properties, there might be a set bar for the minimum credit score to qualify for the bidding alone. You must have a fair idea of your credit score and if you have not checked it in a while, now is the better time.
Where there is no set limit for the maximum security deposit. It often remains at the disposal of the landlord how much he/she finds enough? At the end of the day, it is the landlord who needs to be comfortable if any damage is inflicted to the property. He has the safety check in case the tenant refuses to pay for the losses.
When there are several bidders for the same property then landlords often change the rules of the games. They tweak the set standards and demand more. Sometimes they look for higher rent or on other occasions they ask for more as a security deposit.
When you are in the negotiation phase, you would get to know the requirement for how much you need to submit as a security deposit. If you move on to sign a lease, you would be required to pay a security deposit in advance.
Once you hand over the due amount, the landlord is supposed to store it. The landlord is supposed to open a separate account where interest will be applicable and keep the security deposit in that account. The landlord is also obliged to provide you with the account details where the security deposit is placed.
If the landlord earns the interest over your deposited security, he is supposed to share it with you as well.
Additionally, the landlord is not entitled to use your security deposit and is supposed to provide you towards the end of the lease once it is found out that everything is fine. The tenant also cannot use the security deposit for the last month’s rent rather have to pay the full rent and once the property is abandoned, then after inspection, the tenant may ask the landlord to return the security deposit.
There are no limits on how long a landlord may take to return the security deposit. But conventionally, the bracket of 40 to 75 days is used within which the landlord shall return the security deposit.
We hope, now you know everything that needs to be known about the security deposit.
Have a great time in your new apartment.