Any businessman should have a plan to protect an investment. Without these defensive measures, an entrepreneur could end up losing a chunk of money in the process, something that should be avoided by any investor. For people who invest in rental properties, there are plenty of things to be on guard against.
For one, it is the duty of the landlord to make sure that the property for rent follows the guidelines set forth by the concerned government agency. By not following the laws of the land, the investor can find himself locked in a legal battle that could prove to be very costly and stressful. Another thing that a landlord should be on the lookout for is the probability of getting bad tenants that could lead to damages to the property.
One way that an investor can protect his or her business from this is by requiring tenants to have a security deposit. Keep in mind that the deposit is not the last-month’s rent. It is also not a form of a leverage to use against a tenant for not dusting the blinds after moving out or such trivial things. It is there to protect the landlord from any damages that the tenant may have inflicted on the property. While regulations about the security deposit could change from state to state, the framework is still the same.
If you are a landlord and you want to deduct anything from the security deposit, it should be reasonable and should be documented. You cannot deduct from it because you feel like it. Being dishonest could also lead to big troubles. For instance, many landlords have been taken to small claims court by their tenants for deducting from the security deposit without any good reason. One landlord might fabricate a story that would allow him to deduct $ 400 from the security deposit but if the tenant can prove through valid documentation that the deduction was unreasonable, the court could order the landlord to pay off the deduction threefold.
Understanding the basics of the security deposit is not only a topic for the landlord. Tenants should also learn about it as there are plenty of cases when the tenant would just walk away because they are not aware of their rights. Tenants should also make sure that they read the terms of agreement carefully before affixing their signature. This way, they can avoid dealing with shady landlords.