Why Do Landlords Take a Deposit?

Updated: Feb 16

A deposit for a rental property is requested with every lease agreement. The purpose is to protect both tenant and landlord for the duration of the lease while securing the property you are interested in. There are many factors and conditions surrounding deposits and rentals. Ensuring you are aware of what is entailed will prevent financial loss, living disruptions, and the possibility of legal pursuits.

A closer look at why landlords take a deposit can help you prevent costly and stressful rental mistakes.

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The Difference Between the Rental Deposit and the Security Deposit

Prior to a tenant taking occupancy, a rental deposit and security deposit must be paid. The deposit is either predetermined by the landlord or it is negotiated between the landlord and the tenant upon the rental agreement. Rental deposits secure a property you wish to lease while a security deposit protects against the costs of damage, unpaid rent, and property abandonment.

Why a Landlord Requests a Rental Deposit?

A rental deposit is issued to secure the property of interest and should contribute towards rent.

Why Does a Landlord Collect a Security Deposit?

A security deposit is intended to reimburse the landlord in the event of damages or other losses such as non-payment of rent. It is meant to cover the expenses associated with excessive wear and tear, and other unmet conditions of the lease. It also serves as an incentive for the tenant to pay rent on schedule and follow the conditions of the lease.

The first order of business is to determine how much money landlords can collect for a tenant security deposit. This amount is regulated by state law and varies widely across the country.

For instance:

  1. In Alberta the total of any refundable fees that your landlord asks you for as a security deposit can be up to one month's rent.

  2. In California, it's based on whether the unit is furnished. For unfurnished units, the landlord can't charge more than two months' worth of rent. For furnished rentals, the landlord can charge up to three month's rent for the security deposit.

  3. There is no maximum security deposit a landlord can charge in Tennessee. Tennessee law on security deposits does not currently put a limit on the amount of security deposit.

  4. In New York “No deposit or advance shall exceed the amount of one month's rent”.

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How Much Does a Security Deposit Cost?

The cost of the security deposit is based on the discretion of the landlord, the local neighborhood and state law. There are certain districts that charge a higher security deposit than others making it harder for low to average income families to rent these areas. The security deposit should always be fair in relation to the monthly rent and the applicant rental history.

Factors Landlords Consider when Calculating Rental Deposits

  1. Landlords must adhere to state law.

  2. The deposit must be fair in comparison to monthly rent and renter rental history.

  3. It must reflect the average property rates and values in the area.

  4. It is influenced by the district and available amenities.

Deposits Influenced by Applicant Factors

Special circumstances applicants including bad credit, criminal background, second chance property and employment will influence the total sum for the security and rental deposit.

What is the Purpose of a Deposit?

The purpose of a deposit is to protect your rights as a tenant and the rights of the landlord. It governs the relationship between the lessee and the lessor ensuring that a lessee is not taken advantage of while minimizing the financial loss the landlord can suffer if a property is damaged.

There are numerous terms and conditions associated with deposits. It is up to you as the tenant to thoroughly read through an agreement prior to signing it and transferring the deposit. While regulations are available to protect tenants, it is difficult to dispute conditions once it is signed and the deposit paid according to your rental agreement.

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Do You Get Your Deposit Back from an Apartment?

A refund is determined by the type of deposit. Your lease agreement will stipulate whether the deposit is refundable or non-refundable. Remember, your landlord or property manager is not obligated to provide a verbal breakdown of deposit refunds. You must read the conditions and ask questions where clauses are unclear.

If you wish to receive your deposit, specific terms must be met.

When is a Deposit Refundable?

If the rented property is free from damage, has been cleaned and organized, the landlord will refund your security deposit.

When is a Deposit Non-Refundable?

A security deposit is non-refundable when a leased property is left in disrepair or lost property suffered by the landlord. Landlords may withhold deposits with a failure to pay outstanding rent; however, this is regulated by different states. These regulations also influence whether a rental deposit or a security deposit can be used to cover the last month of rent.

Special Circumstances for Non-Refundable Deposits

The good news is that certain circumstances may allow for the issuing of a deposit even if it is non-refundable. These include the return of all keys, providing sufficient notice, and investing in the best cleaning service leaving the rented property in its original, or even better than original condition!

How to Avoid Deposit Disputes?

Keep the property well-maintained and have any damages repaired prior to the end of tenancy inspection. Always provide your landlord an updated address upon moving to ensure your deposit is refunded.

A common reason for the dissolution of a tenant and landlord relationship concerns the management of the rental deposit. As a tenant, it is important to understand the purpose of your deposit. A landlord is unable to retain a deposit unless the property is left in disrepair or lease conditions are broken.

When Should I Get My Deposit Back?

Once you have moved out, the next step is to contact your landlord and make a formal request for the refund of the security deposit. The average lease includes a 30-day refund period while some have 60-days; however, this is dependent on individual rental agreements. Take the time to carefully read your contract so you are aware of deposit regulations. A thorough understanding of your lease can also prevent delays in issuing refunds.

What Happens to My Security Deposit if I Get Evicted?

Depending on the state you live in, landlords may use a portion of or the full deposit to settle the outstanding rent. It can also be used to cover utilities and other pressing financial matters as determined by the tenant agreement.

Upon eviction, you are still responsible for unpaid rent until the day you move from the property. If you cannot afford to or simply do not pay the required rent, your security deposit will be used as a financial safety net for the landlord.

Why Wouldn't I Get My Security Deposit Back?

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Unpaid Rent

Your landlord has the right to withhold your security deposit if your rent is outstanding. Your rental agreement is a contract and when you fail to meet its requirements, including unpaid rent, a landlord can cover their costs and potential for financial loss, by keeping all or part of the deposit. If you simply fail to pay, this constitutes a breach of contract.


Upon the end of the lease, your landlord can have the property inspected. If it is not in its original condition, damages are apparent or the rental is left unorganized and dirty, the landlord has the full right to withhold the security deposit. Remember, the purpose of a security deposit is to protect the landlord against potential financial damage and loss should the property be left in disrepair by a tenant. If you fail to fix damages you have caused, the associated expenses are deducted from the deposit.

Failed Inspection Prior to Moving In

When landlords inspect an end of tenancy property, every corner and fixture is investigated. If you did not inspect your rental before moving in and signing the lease, any plumbing leaks, carpet damage and general wear and tear that may not have been caused by your actions, will be constituted as deductible from the security deposit. Always examine your property rental and take note of all potential problems. You can also call on a property inspect to issue a detailed report on their findings and protect against a withheld deposit.

Early Lease Termination

If you end a lease early or get evicted, you will not get your deposit back. In some states where monthly rent is paid, the landlord must receive a 30 day notice. A breach allows landlords to keep the entire deposit or a portion of it to cover the financial and other losses.

Can the Landlord Keep the Security Deposit if I Never Moved in?

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There are many circumstances in which you may have the full intention to move into a property, but unforeseen events prevent you from doing so or perhaps you simply change your mind. The next question is whether you get a refund on your security deposit despite not moving in?

If you sign a lease agreement, pay the deposit but do not move in, your landlord can keep the deposit. The contract legally binds you to its terms as soon as it is signed. Only if the agreement states that a partial or full refund is issued upon failure to move in on the agreed upon dates, then the security deposit may be reissued. In a few cases, landlords come to an agreement with a tenant and refund the deposit but do not bank on this should you find yourself in this situation.

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Should I Give a Security Deposit Before Signing a Lease?

A security deposit is required by new tenants to allow the property manager or landlord to issue the keys and access the rental. You would only settle the outstanding security deposit once you sign the lease and not before.

If you find that you have paid the deposit, whether by a money order, electronic payment or by check, and you disagree with the terms and conditions presented in the lease, you will unfortunately, not be eligible to request a refund for the deposit.

Read your agreement, discuss uncertain terms with the landlord or property manager and once you are satisfied with the lease, sign and pay the deposit.

Can I Change My Mind After Paying a Deposit?

The lease agreement is a contract and includes the payment of the deposit. Once you secure the rental by depositing the requested payment, it is legally binding. The property manager or landlord does not have to refund the deposit if you no longer wish to move in. It is like purchasing an item at a local store but first placing a deposit to hold the product for you. If you return and discover you are no longer interested, the business is not required to issue the deposit.

What Do Most Apartments Charge for a Rental Deposit?

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Rental deposits are paid to secure the property and frequently used to cover full or partial rent. The deposit issued for rental purposes is influenced by multiple factors. To determine a valuable and fair rental deposit, the following must be considered.

The Average Rental Deposit

The average rental deposit is one month’s rent; however, this is not a standard requirement. Some rental deposits can reach up to three months of rent.

State Limits

Each state will determine the limit property managers and landlords can charge when issuing a rental deposit. Be sure to take the time to compare rates. Some states have a ceiling rate while others do not.

Area Rates

The cost of a rental deposit is influenced by the rates for the area. It is also determined by the amenities and features within the neighborhood. Competitive landlords who are seeking tenants may offer similar rental prices to other apartments to lease the property quickly.

While landlords and property managers are required to adhere to state regulations and average pricing, doing a little research into the expected rental deposit costs can help you make a valuable decision.

Find the Best Property Rentals and Know Your Rights

Finding and moving into a property that meets your living criteria is exciting; however, it should never go without doing some homework first. This includes understanding your rights as a tenant and that of a landlord. Know the difference between a security deposit and a rental deposit and the steps you can take prior to signing a lease.

By eliminating the misconceptions, you can prevent the pitfalls concerning deposits and rental agreements. The management of a deposit is your responsibility as the tenant. Prior to issuing the deposit, always read the terms and conditions of your lease. If you are unhappy with the contract or you change your mind, you can leave unscathed if you have not deposited the money to the landlord.

To receive your security deposit by the end of tenancy, maintain the property condition and ensure any damages are taken care of prior to an inspection by the landlord. If there are no damages and the property is clean, your deposit should be fully refunded.

Landlords cannot use the deposit for the duration of the tenancy. Once the lease expires, the funds are released, and deductions made for property damages or unpaid rent.

From security to rental deposits, save time, money, and the stress of common leasing problems by understanding your rights and obligations.

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