When it comes to rental housing, a deposit is a deposit, right?
There are security deposits, pet deposits, cleaning deposits and damage deposits, to name a few. And, of course, they can all be used to cover any amounts owed by the tenant when they vacate.
Wait, what’s that? A pet deposit can’t be used to cover unpaid rent?
Cleaning deposits can’t be used to cover unpaid utility bills?
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Welcome to Deposits 101, a brief guide to deciding which types of deposits are most recommended and appropriate to charge.
The bottom line for any deposit is that it should ensure that landlords are covering themselves against any risk and potential losses when renting to a tenant.
While there are no limits for the amounts that can be charged for a deposit, the rental market and type of rental unit are going to directly impact what is realistic to charge.
For single-family homes, a deposit of one month of rent is fairly common to protect against any possibility of unpaid rent. Apartments generally have much lower deposit requirements.
The types of deposits can vary depending upon their intended purpose. From the landlord’s perspective, it is recommended that only a security deposit be charged at the time of lease signing.
A security deposit is recommended because, by definition, it may be used to cover any amounts owed by the tenant. That can include unfinished cleaning, damages, owed rent, late fees, unpaid utility bills — you name it.
Landlords often make the big mistake of referring to the deposit as a “damage deposit” when they are accepting a deposit and signing a lease.
A damage deposit can actually only be used to cover costs for damages at the rental property. Unpaid rent and late fees cannot be charged to a damage deposit.
The same goes for a pet deposit, which can only be used for issues related to the pet. A cleaning deposit can only be used for cleaning.
Given that deposits with specific labels can only be used for their stated purpose, it can be argued that the value of collecting any sort of deposit outside of a security deposit is really quite limited.
What alternatives do landlords have to gather an additional deposit to cover risk?
In the case of a tenant with a pet, an alternative to charging an additional pet deposit is to simply require an increased security deposit amount. This gives landlords coverage for issues related to the animal and any other situation that results in money owed by the tenant.
It’s important to remember that any deposit money collected by the landlord is always fully refundable, less any charges deducted for costs incurred by the landlord outside or normal wear and tear.
Sometimes a portion of a deposit is earmarked as “nonrefundable.” Nonrefundable fees are common for routine issues that arise from tenant turnover, such as carpet cleaning, painting and administrative fees.
If a landlord wants to collect a nonrefundable fee, the rules are simple. The amount collected must be labeled as a nonrefundable fee within the lease, separate from any deposit collected, and its purpose must be stated in the lease.
Sean Martin is the director of external affairs of the Rental Housing Association of Washington, a not-for-profit association of more than 5,000 landlord members statewide. Rental Resource is the organization’s biweekly column. For more information for landlords or tenants, visit rhawa.org.