Security deposits are not a legal requirement when it comes to rental properties. However, they do serve as a form of security recourse for a property management company or a landlord in the event that rent is unpaid or damage is done to the property.
Security deposit amounts vary widely from state to state, but most will be equal to about a month's worth of rent. In Utah, along with a few other states, there is no statutory limit as to what a landlord can charge when it comes to a security deposit amount.
If you'd like to know more about security deposits and why they're an important part of a lease agreement, we've got 3 good reasons why you should be charging your tenants a security deposit.
1. Repair Damages
Normal wear and tear on a property is normal. However, when normal wear and tear escalates, a security deposit serves as a great buffer for damages incurred.
When careless tenants leave holes in the walls, damage the carpet, or even ruin appliances, having a security deposit at the ready will help repair such damages.
A security deposit is a great way for property maintenance to remain taken care of, and to encourage tenants to respect their surroundings. Most people tend to care for the home they live in, but a security deposit is that extra safety net if one particular tenant does not.
2. Covers Unpaid Rent
It's inevitable that life gets in the way, and some tenants may leave without paying the final month of their rent or they leave midway through a lease. When this happens, a security deposit for rent outstanding provides a way for lost income to be made up.
The security deposit provides a transition cushion of funds while the new vacancy gets filled.
3. Unpaid Utilities
Depending on the property, some landlords have utility bills signed under their name. Monthly charges are then allocated to tenants. In the event that a tenant is unable or unwilling to pay their bills, a security deposit will cover the lapse in payment.
In addition, utilities will need to remain on in-between filling any vacancies. When utilities get transferred back to a landlord or property manager's name, any unpaid utilities will need to be taken care of. A security deposit can help close the gap and keep the utilities on and running until you can get a new lease agreement signed.
Sign Here for Security Deposits
Hopefully we've been able to answer the question as to 'what is a security deposit used for' and how they're helpful in the event of unforeseen circumstances. Security deposits are a common occurrence and many property management companies charge a deposit as part of a standard lease agreement.
If you're a landlord or property manager looking to fill vacancies in the Salt Lake area and are looking for some additional tips on how to do so, look no further. At Wolfnest, our specialized staff is ready to help out with any type of property management situation. Why not contact us today for a free rental analysis?