What Do Landlords Need to Know about Security Deposits?

What Do Landlords Need to Know about Security Deposits?

Part of being a landlord means knowing how to handle financial transactions, including security deposits. According to one survey, one in four tenants said they did not get their security deposit back after they left their rental.

While things like tenant placement and rent collection are important, knowing how to manage these deposits is equally crucial.

Read on to learn what landlords should know about managing these types of payments in South Carolina.

Deposits Have Limits

In some states, landlords must put a limit on the amount they can collect for security deposits per the law. These deposits are put in place to protect the landlord in case the tenant doesn't pay rent or if they leave the property with damage that has to be repaired.

However, in South Carolina, there is no limit on security deposits, so the total amount is up to you. It's still wise to be realistic with the deposit amount which is typically set at the cost of the first (or first and last) month's rent. An additional pet deposit is advised if your tenants are allowed to have pets on the property.

Accounting and Security Deposits

It's vital to keep accurate records of all the security deposits you receive. Some states require you to keep the deposit in a local bank with an interest-bearing account.

In South Carolina, there's no requirement for how or where you should deposit the money. Ideally, keeping these deposits in a separate account makes the accounting process easier.

Allowable Use and Disclosure

In South Carolina, landlords have to disclose how they determined the amount of the security deposit. This applies if you rent more than four adjoining units. You must disclose how you calculate the deposit before the tenant signs their rental agreement.

You cannot use the deposit to pay for ordinary wear and tear. These deposits are intended to pay for damage to your property caused by the tenant, any legal occupants, or guests of the tenant. Landlords in South Carolina may also use the deposit to pay for unpaid rent.

Returning Deposits

Your tenant must give you a forwarding address before they move out so you can send them a written notice of any charges and/or where you should send the deposit. If you don't get a forwarding address, the tenant is not entitled to any money as long as you had no knowledge of their whereabouts and mailed it to their last-known address.

Provide a written notice of deductions or charges to their security deposit and the remaining amount due. It's also advised to include the information from the move-out inspection and details of the Condition of the Premises Agreement.

Make Deposits Work for You

Remember these tips to help you manage security deposits the right way. With the right information, you can ensure every transaction goes smoothly.

PMI Palmetto has two decades of experience helping landlords with their property management needs, so be sure to contact us today to schedule your consultation, or to learn more.