As you may know, security deposits are a standard component of renting a home whether you're an owner requiring the deposit or a new tenant paying the deposit. Security deposits are funds that tenants put down at the onset of their lease. This money is meant to cover any extreme or unusual damages to the property during their occupancy. When tenants vacate, the security deposit is returned to them minus any deductions that have been made to cover excessive damages if applicable.
This may sound pretty straightforward, but there are laws in North Carolina that determine how much a security deposit can be, what types of things can be deducted from deposits and where security deposit funds must be held during a renter's lease term. If you aren't familiar with the ins and outs of security deposits, things can get quite complicated when it comes time for your tenant to move out.
For tenants, if you haven't familiarized yourself with the expectations your landlord or property management company have in regard to what condition the property must be left in upon your move out, you may find yourself with unexpected security deposit deductions at lease end.
What Do Property Owners Need to Know About Security Deposits?
1. It is always best to set clear expectations in writing before tenants even put the deposit down. Be sure that renters understand what they'll be responsible for and what costs may be deducted at the end of their lease. Though there is no way to predict what may occur at a property while it is being rented out, be as clear as possible about what will be considered in excess of normal wear-and-tear.
2. Familiarize yourself with North Carolina laws pertaining to security deposits. For more details on this, you can read up on NC Security Deposit Laws here.
3. In North Carolina, tenant security deposits must be kept in a trust account for the duration of the tenancy and deposits must be kept separate from other funds. To understand this better, it is recommended that property owners talk to an accountant or other trusted financial professional about opening a trust or escrow account in which to keep these funds.
4. Be sure to charge the appropriate amount. Oftentimes for long-term rentals, a standard security deposit is equal to one month's rent. However, property owners can charge up to two month's rent if they feel it’s necessary. But remember, in North Carolina, owners may never charge a security deposit in excess of two month's rent.
5. Document property condition before new tenants move in. Do a thorough walkthrough of the property and take a video of the everything inside and out. Take photos as well. This will make it much easier to determine what may or may not have been damaged at the end of a tenant's lease.
If property owners make sure to do all of these things, deductions from and disbursement of the security deposit at lease end can often be a smooth, worry-free process.
What Should Tenants Keep in Mind About Security Deposits?
Just as property owners are protecting themselves with the charging of a security deposit, there are some things that renters can do when moving into a new home to ensure that they get as much of their deposit back as possible.
1. Keep track of all the documents related to your lease. This includes not only a copy of the lease itself, but any documents related to property maintenance, inspections and expectations upon move out. It’s best to keep them in one place so that you can easily access them for reference whenever you may need.
2. Document the property condition when you move in. Make note of cosmetic damages, anything that is broken, etc., and submit these items to your landlord or property manager to ensure you don’t get charged for something that was preexisting in the home. In addition, take photos of the property inside and out and submit those as well. Your property managers will have taken photos and videos themselves prior to your move in, but it’s always a good idea to have your own documentation of property condition as well.
3. Be sure you understand what is required of you at move out. Do you have to hire a professional cleaner, or can you do it yourself? Do you have to have carpets professionally cleaned? What about nail holes in the walls? Do you need to mow the lawn? Being informed of things like this at the onset can help you be prepared to fulfill your obligations when it comes time to vacate your rental property.
4. Ask questions. If you're not sure if something is a tenant responsibility, reach out to your property manager. This is the easiest way to clear up any potential confusion prior to your move out and can prove to be a great help when it comes time for your inspection and security deposit disbursement.
The process of determining damages and disbursing security deposits can get quite complex at times. One of the best ways to ensure this process goes smoothly is to work with a professional property management company like Sweyer Property Management. For tenants, working with professionals helps set up clear expectations and ensures that someone is around to answer questions and provide guidance. And for owners, experienced property managers are familiar with the laws surrounding security deposits and can easily navigate the process, taking a big worry off investment property owners. Interested in finding out more about what the professionals at Sweyer Property Management can do for you? Reach out today.