Property Management Tip: The Scoop on Security Deposits

One of the biggest issues in landlord tenant disputes is the return of the security deposit. More bad feelings are generated by the mishandling of this than almost any other issue.

If the security deposit is discussed during the lease signing orientation, it is less likely that a dispute will arise later on. For those of you who arent clear as to the rules, this is the way it is in San Francisco

How Much Can I Charge
An owner can charge up to two times the rent or three times the rent for a furnished apartment. This is the maximum amount and must include such things as "pet deposit" or "cleaning fee". No other fees can be put on top of the 2x and 3x limitations.

Can I Keep Security Deposits
The deposit is never nonrefundable. It is a fee designed to protect the owner and the property against mis-use.

How Long can I Keep The Deposit
By law, you must return the deposit within 21 days. Any failure to do so can result in a fine of up to two times the deposit, if it is deemed you have acted maliciously when an angry tenant drags you to small claims court and wins. It may be possible to withhold a portion longer than the 21 days if it will take longer to get an estimate for repairs. It gets murky here and you should talk to your attorney before withholding beyond the 21 days.

Deductions from the Security Deposit
Any deductions over $125.00 must be accompanied with itemized receipts from the vendors you have hired to repair or clean as necessary.

The landlord can deduct 50% of the rent board fee from the security deposit. Landlords who pay the security deposit interest annually instead of giving the tenant an equivalent rent credit, may also bill for the Rent Board fee separately rather than deducting it from the interest payment owed. Landlords may "bank" the Rent Board fee since November 1999 and collect it in a later year. For the 2007-2008 tax year, the rental unit fee is $26.00 per apartment unit and $13.00 per residential hotel room.

Do I owe Interest
Yes. generally it is due on the anniversary or lease date. The rent board determines the interest due every year. Often, owners will keep or "bank" the interest until the tenant moves out. This is acceptable unless the tenant asks for it in writing. Then send off a check and file a copy.
This year the interest on security deposits is for the period March 1, 2008 through February 28, 2009 is 5.2%

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