The law in each state regulates rental security deposits, giving specific requirements for how money is held during the lease and how the return of that deposit is handled at the end of the lease.
Landlords may be required to hold the security deposit in a separate bank account, and if there is interest earned the laws may indicate who is to receive that interest. Additionally, the state laws will specify the timing of the return of the deposit to the tenant, and usually require a written explanation of any amount retained by the landlord.
It’s important to clarify the difference between a security deposit and advance payment of rent. A security deposit is given from a tenant to the landlord to be held in the event there is damage to the property, caused by the tenant.
Advance payment of rent equal to a full or partial month is sometimes collected, to assure the landlord will receive the final month’s rent when the tenant vacates. A security deposit cannot be used by the tenant for that last month’s rent.
The tenant needs to pay the rent on time (or risk being in default of the terms of the lease). The security deposit is then returned to the tenant (the terms of that are addressed by the lease and by state laws).
Reduce the possibility of late or non-payment of rents and disputed deposits with effective tenant screening
from E-Renter USA
There are many pre-printed lease forms, and they may suit your purposes just fine. It is always acceptable to change certain items on a pre-printed form, as long as all parties who will sign the document also initial those changes.
You can, of course, also choose to create your own lease (although you should check your local laws or contact an attorney for advice). If you do want to create your own, these are some common items to include in a lease:
- names of all parties
- description of the rental property
- term of the lease
- amount of rent and when that rent is due
- all details regarding security deposit
- what happens in the event of default of any party
- if there is a late fee (and in what amount and when it is due)
- is a business allowed on the property
- does disturbing other tenants constitute default of the lease
- duties of both parties with regard to maintenance
- what happens at the end of the lease term
- under what conditions is the landlord allowed to enter the property
- who pays attorney fees in the event of a lawsuit
- are pets allowed (and details)
- what happens if the landlord dies or sells the building during the term of the lease
Of course, it is your property and you should choose how you manage it. You should always do research so you know as much about your choices as possible. Section 8 housing programs are designed to help very low income families, people with disabilities, and the elderly find affordable housing.
If you become familiar with the programs, you can benefit from Section 8 housing programs as well. After you are approved as a landlord for Section 8 tenants:
- your tenants will come to you already approved
- many of these people are very eager to have a new start in life
- they have been made very aware that if they get evicted from your property, they lose their approval for Section 8 housing
The local Section 8 housing authority will be paying a large share of your rent each month for the Section 8 units, and it arrives on time each month. The remaining rent you will collect from the tenants, who generally pay promptly. They know that there is a waiting list of eligible renters, so they are good tenants.
When rental property becomes uninhabitable and the tenant no longer has full use and possession of a rental property, that tenant can claim Constructive Eviction to relieve the obligation to pay rent to the landlord. A tenant must take several steps to claim Constructive Eviction:
- The tenant must serve the landlord with a written notice of the construction eviction
- Tenant must also provide the landlord with a reasonable period of time to correct the situation.
- If the defects are not corrected within that reasonable period of time, the tenant then may be able to leave the property without being responsible for payment of rent otherwise due under the lease.
- In most cases, the tenant must physically move out of the property, and then sue for damages, etc.
Managing commercial property is different than managing residential property. There are additional questions to ask tenants applying to rent commercial property.
Questions to Ask:
- Who is the actual tenant
- What is the business
- Who will be guaranteeing payment on the lease? In other words, is there an individual who will guarantee payment, or will it be the legal business entity?
- Who are the customers of this business?
- If this is a new business, you might want to see a copy of the business plan to see what history there is, ownership and management resumes, and operating budget (where is the rent coming from?).
- If this is an established business, you should request some financial information to show income for the last few years. And if the lease is guaranteed by an individual, ask for evidence of their financial ability to pay as well.