 | The examples and perspective in this article may not represent a worldwide view of the subject.(May 2024) |
A security deposit is a sum of money held in trust. [1]
In leasing, security deposits, also known as "rent deposits", [2] are required most often by lessors of automobiles, residential property, and commercial real estate. [1]
The United States Supreme Court ruled in Commissioner v. Indianapolis Power & Light Co. (1990) that a deposit differs from an advance payment because the depositing party has dominion over the funds and retains the right to insist upon repayment in cash. On the other hand, the party making an advance payment retains no right to insist upon the return of the funds as long as the recipient fulfills the contractual agreement. [3]
The security deposits required by many residential landlords of their tenants are the source of much dispute and litigation. Many states and municipalities have enacted laws that specifically regulate the landlord's ability to withhold tenant security deposits after a tenant moves out. Some states and cities require that interest be paid to the tenant as it is earned on the security deposit. The rate of interest earned on security deposits typically changes each year. Currently[ when? ] this rate is set at .06% in the state of Connecticut. [4] The rate is .01% in Chicago, Illinois, but this rate is only payable on buildings with a certain occupancy threshold. [5]
A landlord's deductions from a tenant's security deposit must be reasonable. The landlord may make deductions for missing rent payments and for damages beyond ordinary wear and tear, which is the subject matter's depreciation or deterioration in value by reasonable and ordinary use by the tenant. Examples of non-deductible wear and tear include: paint retouching, minor cleaning, small tack holes, and nicks and scratches. Examples of deductible damages include large or excessive holes in the wall, carpet stains, and broken doors and windows. [6] [7]
If a landlord wrongfully withholds a tenant's security deposit, the tenant may be entitled to additional damages beyond the amount of the security deposit. These may include statutory damages for violation of a local statute on consumer collection practices, damages that may be two or three times the amount of the deposit (in some states, such as California), consequential (resulting) damages, interest, and in more rare instances punitive damages. [8] [9]
In the United States, Washington, DC, Alaska, Illinois, and Wisconsin have notably more tenant-friendly legislation than states like Indiana or Michigan, for example. The cities of Madison, Wisconsin, and Chicago, Illinois, have substantially greater protection of tenants' security deposit rights than the surrounding areas. [10]
Studies have shown that landlords often improperly withhold security deposits after tenants move out, and often get away with it because it's too much trouble to fight. [11]
The recent[ when? ] changes to the condominium and cooperative laws in New York have created limits for the regulations behind security deposits. Cooperative boards can no longer charge more than one month of prepaid maintenance and another month's maintenance as a security deposit restricting the amount to be owed before moving in. [12] [13]
In states which are more tenant-friendly, like Connecticut, the amount an owner can charge for a security deposit in any property is limited to the equivalent of two month's rent. This limit is reduced to one month's rent for tenants age 62 and over. [4]
In England and Wales, a security or rental deposit may be documented in a rent deposit deed, which is a separate agreement supplementary to a lease agreement. [14]
In metropolitan cities of India [15] like Chennai, Bangalore, Mumbai or others, there is security deposit to be given upfront to the landlord before renting/leasing an apartment. This security deposit amount can range anywhere from 3– 11 months, depending upon city's norm. With rentals soaring high in metropolitan cities, this amount becomes exorbitant. [16]
Renting, also known as hiring or letting, is an agreement where a payment is made for the use of a good, service or property owned by another over a fixed period of time. To maintain such an agreement, a rental agreement is signed to establish the roles and expectations of both the tenant and landlord. There are many different types of leases. The type and terms of a lease are decided by the landlord and agreed upon by the renting tenant.
A landlord is the owner of a house, apartment, condominium, land, or real estate which is rented or leased to an individual or business, who is called a tenant. When a juristic person is in this position, the term landlord is used. Other terms include lessor and owner. The term landlady may be used for the female owners. The manager of a pub in the United Kingdom, strictly speaking a licensed victualler, is referred to as the landlord/landlady. In political economy it refers to the owner of natural resources alone from which an economic rent, a form of passive income, is the income received.
A lease is a contractual arrangement calling for the user to pay the owner for the use of an asset. Property, buildings and vehicles are common assets that are leased. Industrial or business equipment are also leased. In essence, a lease agreement is a contract between two parties: the lessor and the lessee. The lessor is the legal owner of the asset, while the lessee obtains the right to use the asset in return for regular rental payments. The lessee also agrees to abide by various conditions regarding their use of the property or equipment. For example, a person leasing a car may agree to the condition that the car will only be used for personal use.
A leasehold estate is an ownership of a temporary right to hold land or property in which a lessee or a tenant has rights of real property by some form of title from a lessor or landlord. Although a tenant does hold rights to real property, a leasehold estate is typically considered personal property.
Section 8 of the Housing Act of 1937, commonly known as Section 8, provides rental housing assistance to low-income households in the United States by paying private landlords on behalf of these tenants. Approximately 68% of this assistance benefits seniors, children, and individuals with disabilities. The Department of Housing and Urban Development (HUD) oversees Section 8 programs, which are administered locally by public housing agencies (PHAs).
Key money is one of several forms of payment made to a landlord. The term has various meanings in different parts of the world. It sometimes means money paid to an existing tenant who assigns a lease to a new tenant where the rent is below market. It sometimes means a bribe to a landlord. In other parts of the world, it is used synonymously with normal security deposits, which are used to cover nonpayment of rent and excessive damage to a rental unit.
A Lease-Purchase Contract, also known as a lease purchase agreement or rent-to-own agreement, allows consumers to obtain durable goods or rent-to-own real estate without entering into a standard credit contract. It is a shortened name for a lease with option to purchase contract. For real estate, a lease purchase contract combines elements of a traditional rental agreement with an exclusive right of first refusal option for later purchase of the home.
A rental agreement is a contract of rental, usually written, between the owner of a property and a renter who desires to have temporary possession of the property; it is distinguished from a lease, which is more typically for a fixed term. As a minimum, the agreement identifies the parties, the property, the term of the rental, and the amount of rent for the term. The owner of the property may be referred to as the lessor and the renter as the lessee.
Subsidized housing is government sponsored economic assistance aimed towards alleviating housing costs and expenses for impoverished people with low to moderate incomes. In the United States, subsidized housing is often called "affordable housing". Forms of subsidies include direct housing subsidies, non-profit housing, public housing, rent supplements/vouchers, and some forms of co-operative and private sector housing. According to some sources, increasing access to housing may contribute to lower poverty rates.
Jeonse, also known as chŏnse, key money deposit or key money, is a type of lease or deposit common in the South Korean real estate market. Instead of paying monthly rent, a renter will make a lump-sum deposit on a rental space, at anywhere from 50% to 80% of the market value, which is then returned at the end of the lease term. The owners make profit from reinvesting the jeonse deposit, instead of receiving the monthly rent. It is also possible to combine a lower jeonse deposit with a small monthly rent; this is known as banjeonse
Buy-to-let is a British phrase referring to the purchase of a property specifically to let out, that is to rent it out. A buy-to-let mortgage is a mortgage loan specifically designed for this purpose. Buy-to-let properties are usually residential but the term also encompasses student property investments and hotel room investments.
A slumlord is a slang term for a landlord, generally an absentee landlord with more than one property, who attempts to maximize profit by minimizing spending on property maintenance, and to tenants that they can intimidate. Severe housing shortages allow slumlords to charge higher rents and, when they can get away with it, to break rental laws.
Landlord harassment is the willing creation, by a landlord or their agents, of conditions that are uncomfortable for one or more tenants in order to induce willing abandonment of a rental contract. This is illegal in many jurisdictions, either under general harassment laws or specific protections, as well as under the terms of rental contracts or tenancy agreements.
Under the provisions of the United Kingdom Housing Act 2004 every landlord or letting agent that takes a deposit for an assured shorthold tenancy in England and Wales must protect the deposit under an authorised tenancy deposit scheme. The regulations came into effect on 6 April 2007, and were amended by the Localism Act 2011 and the Deregulation Act 2015. Most recently the Tenant Fees Act 2019 provided further protections for tenants.
Landlord–tenant law is the field of law that deals with the rights and duties of landlords and tenants.
The Ellis Act is a 1985 California state law that allows landlords to evict residential tenants to "go out of the rental business" in spite of desires by local governments to compel them to continue providing rental housing.
Rent regulation in Canada is a set of laws and policies which control the amount by which rental prices for real property can increase year to year. Each province and territory can pass legislation, where the purpose is to limit rent prices increasing beyond what is affordable for most home dwellers.
An Estoppel Certificate is a document commonly used in due diligence in real estate and mortgage activities. It is based on estoppel, the legal principle that prevents or estops someone from claiming a change in the agreement later on. It is used in a variety of countries for commercial and residential transactions. It is a document often completed, but at least signed, by a tenant used in their landlord's proposed transaction with a third party. A mortgage lender intending to collateralize a tenant-occupied property or a purchaser intending to purchase such a property will often want to verify certain representations made by the landlord.
A retail lease is a legal document outlining the terms under which one party agrees to rent property from another party. A lease guarantees the lessee use of an asset and guarantees the lessor regular payments from the lessee for a specified number of months or years. Both the lessee and the lessor must uphold the terms of the contract for the lease to remain valid.
Eviction in the United States refers to the pattern of tenant removal by landlords in the United States. In an eviction process, landlords forcibly remove tenants from their place of residence and reclaim the property. Landlords may decide to evict tenants who have failed to pay rent, violated lease terms, or possess an expired lease. Landlords may also choose not to renew a tenant's lease, however, this does not constitute an eviction. In the United States, eviction procedures, landlord rights, and tenant protections vary by state and locality. Historically, the United States has seen changes in domestic eviction rates during periods of major socio-political and economic turmoil—including the Great Depression, the 2008 Recession, and the COVID-19 pandemic. High eviction rates are driven by affordable housing shortages and rising housing costs. Across the United States, low-income and disadvantaged neighborhoods have disproportionately higher eviction rates. Certain demographics—including low income renters, Black and Hispanic renters, women, and people with children—are also at a greater risk of eviction. Additionally, eviction filings remain on renters' public records. This can make it more difficult for renters to access future housing, since most landlords will not rent to a tenant with a history of eviction. Eviction and housing instability are also linked to many negative health and life outcomes, including homelessness, poverty, and poor mental and physical health.
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