WHAT IS A SECURITY DEPOSIT?
A Security Deposit is a deposit of money paid by the tenant to the landlord to secure the successful performance or completion of a lease. The Security Deposit is typically paid at the time the lease is mutually executed by the tenant and landlord, and is held by the landlord or the landlord’s lender throughout the lease term. The lease will often determine when the deposit must be returned after the lease term expires and / or the tenant vacates the premises. The majority of states also have laws regarding how security deposits may or must be held and how and when they must be returned to the tenant.
Security Deposits are often in the amount of one or two month’s total rent.
It is important to understand that a security deposit is not the same thing as pre-paying for the first or last month’s rent, which you will often see when leasing or renting a residential property. If a tenant attempts to use their security deposit in lieu of their last month’s rent, a landlord may have the ability to charge late fees or place the tenant in default of their lease commitment.