There are legal requirements to how much of a security deposit you collect and how long you wait to return it to the tenants after a lease period has ended. Landlords are often unsure about how to handle security deposits, so make sure you know and comply with the law.
Collecting a Security Deposit
The first task is to determine how much of a security deposit to require from your tenants. The state of Missouri allows you to collect no more than the equivalent of two months of rent. So, if your monthly rent is $1,000, your security deposit cannot be any higher than $2,000. When you’re trying to decide how much to ask for, you need to consider a couple of things that will be different from tenant to tenant. Consider their credit history and their rental history. These things will impact whether you need to request more or less in a deposit. You also have to consider whether they have pets. Most landlords will collect a higher deposit when tenants are moving into the property with dogs and cats.
Holding the Security Deposit
At Select Leasing & Management, we collect the security deposit when the tenants sign the lease. Once we have the funds, we turn them over to the property owner. You’ll need to hold them until the end of the lease period. Use a separate account for these funds. This is not your money; it’s your tenant’s money.
Returning the Security Deposit
When we meet with the tenants for the move in process, we go through the condition of the house and explain that we expect to receive the property in the same condition when they move out. We record any damages or defects that are outside of normal wear and tear. At the end of the lease, we meet with the tenants again and go through the house once more. We compare the property’s condition at move in to the way it looks at move out. If everything looks good, we let the owner know that it’s okay to return the security deposit. In Missouri, you have to return the money within 30 days of a tenant’s move out.
If you have any questions about how to handle security deposits at your rental property, please contact us at Select Leasing & Management.