Overcharge a Deposit and You Might End up With Legal Charges for Yourself.
As a landlord, while you want to optimize your income, overlooking the provisions of the law could cost you dearly. Something as simple as mischarging a tenant’s security deposit could result not only in the tenant withholding the rent, you would also need to incur expenditure by way of legal fees.
It is important to remember that each state has a different set of rules when it comes to the security deposit for rent. For an unfurnished apartment in California for example, a landlord can only collect twice the amount of rent for a deposit. Up to three months of rent can be charged if the unit is fully furnished. Technically, apartments furnished with a waterbed can charge up to three-and-a-half times the cost of rent for a deposit. Some states, however, may have no statutory limits, so be sure to check the individual laws. Here is a handy state-wise mandate:
| State | Limit |
|---|---|
| Alabama | One month’s rent, except for pet deposits, deposits to cover undoing tenant’s alterations, deposits to cover tenant activities that pose increased liability risks. |
| Alaska | Two months’ rent, unless rent exceeds $2,000 per month. Landlords may ask for an additional month’s rent as a deposit for a pet that is not a service animal but may use it only to remedy pet damage. |
| Arizona | One and one-half months’ rent |
| Arkansas | Two months’ rent |
| California | Two months’ rent (unfurnished); three months’ rent (furnished). If the tenant is an active service member, no more than one month’s rent (unfurnished) or two months’ rent (furnished). Add an extra one-half month’s rent for a waterbed. |
| Colorado | No statutory limit |
| Connecticut | Two months’ rent (tenant under 62 years of age); one month’s rent (tenant 62 years of age or older). Tenants who paid a deposit in excess of one month’s rent, who then turn 62 years old, are entitled, upon request, to a refund of the amount that exceeds one month’s rent. |
| Delaware | One month’s rent on leases for one year or more. For month-to-month tenancies, no limit for the first year, but after that, the limit is one month’s rent (at the expiration of one year, landlords must give tenants a credit for any deposit held by the landlord that is in excess of one month’s rent). No limit for furnished units. Tenants may offer to supply a surety bond in lieu of or in conjunction with a deposit, which landlord may elect to receive. |
| District of Columbia | One month’s rent |
| Florida | No statutory limit |
| Georgia | No statutory limit |
| Hawaii | One month’s rent. Landlords may require an additional one-month rent as a security deposit for tenants who keep a pet. |
| Idaho | No statutory limit |
| Illinois | No statutory limit |
| Indiana | No statutory limit |
| Iowa | Two months’ rent |
| Kansas | One month’s rent (unfurnished); one and one-half month’s rent (furnished); for pets, add extra one-half month’s rent. |
| Kentucky | No statutory limit |
| Louisiana | No statutory limit |
| Maine | Two months’ rent |
| Maryland | Two months’ rent |
| Massachusetts | One month’s rent |
| Michigan | One and one-half months’ rent |
| Minnesota | No statutory limit. If the landlord collects a “pre-lease deposit” and subsequently rents to the tenant, the landlord must apply the pre-lease deposit to the security deposit. |
| Mississippi | No statutory limit |
| Missouri | Two months’ rent |
| Montana | No statutory limit |
| Nebraska | One month’s rent (no pets); one and one-quarter months’ rent (pets). |
| Nevada | Three months’ rent; if both landlord and tenant agree, the tenant may use a surety bond for all or part of the deposit. |
| New Hampshire | One month’s rent or $100, whichever is greater; no limit when landlord and tenant share facilities. |
| New Jersey | One and one-half month’s rent. Any additional security deposit, collected annually, may be no greater than 10% of the current security deposit. |
| New Mexico | One month’s rent (for the rental agreement of less than one year); no limit for leases of one year or more. |
| New York | One month’s limit for units other than those subject to the City Rent and Rehabilitation Law or the Emergency Housing Rent Control Law. |
| North Carolina | One and one-half months’ rent for month-to-month rental agreements; two months’ rent if the term is longer than two months; may add an additional “reasonable” non-refundable pet deposit. |
| North Dakota | One month’s rent. If a tenant has a pet that is not a service or companion animal that the tenant keeps as a reasonable accommodation under fair housing laws, an additional pet deposit of up to $2,500 or two months’ rent, whichever is greater. To encourage renting to persons with felony convictions, landlords may charge up to two months’ rent as security. |
| Ohio | No statutory limit |
| Oklahoma | No statutory limit |
| Oregon | No statutory limit. Landlords may not impose or increase deposit within the first year unless parties agree to modify the rental agreement to allow for a pet or other cause, and the imposition or increase relates to that modification. |
| Pennsylvania | Two months’ rent for the first year of renting; one month’s rent during the second and subsequent years of renting. |
| Rhode Island | One month’s rent |
| South Carolina | No statutory limit |
| South Dakota | One month’s rent (higher deposit may be charged if special conditions pose a danger to the maintenance of the premises). |
| Tennessee | No statutory limit |
| Texas | No statutory limit |
| Utah | No statutory limit |
| Vermont | No statutory limit |
| Virginia | Two months’ rent |
| Washington | No statutory limit |
| West Virginia | No statutory limit |
| Wisconsin | No statutory limit |
| Wyoming | No statutory limit |
Remember that the rules apply not only to the beginning of the rental agreement but also during the entire relationship with the tenant. Property managers cannot ask for an additional security deposit for the rental property during the midst of a lease. However, once the lease is completed and/or in a month-to-month contract, an additional rent deposit can be requested, so long as you follow the laws and guidelines.
State laws are also quite specific related to the deadlines for returning security deposits. For the specific law in your state, also remember to look up the individual state’s security deposit statutes.
In the absence of looking up the technicalities of the security deposit for rent, you could end up facing both financial pain and legal burden. The best advice is to be mindful of the simple rules and keep the cash flow going!
Trevor Henson
Trevor Henson is an experienced entrepreneur (10+ highly-successful start-ups) and property investor with a demonstrated history of building and leading teams in investment property management environments, maximizing returns for property owners, and optimizing properties through construction management and re-positioning. He…Learn more about how we can help. Customized solutions for large portfolios!