Security deposit is a one-time payment made by the tenants to the landlord. It is different from monthly rents and is utilized by the landlords as a protection against the damages caused by the renters while they are occupying the Philadelphia rental property. At the end of the lease, the landlord is expected to return the security deposit, in case of property damage.
Handling rental security deposits isn’t as simple as it appears to be. Several landlords fail to handle security deposits efficiently and end up finding themselves in conflict with the tenants and the law. Penalties for withholding security deposits without documentation and/or beyond the legal time frame can be two times (2x) the amount of the security deposit that was collected.
Here are a few tips that can help the landlords smoothly handle rent deposits in Philadelphia.
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Ask for an Adequate Amount as a Security Deposit
It is essential to ask for an appropriate amount as a security deposit. The amount that can be charged as the holding deposit varies from state to state.
According to the Pennsylvania landlord-tenant law, the maximum amount landlords can charge as a security deposit is a rent of two months for the first year and an equivalent of rent of one month during all subsequent years of renting. Homeowners should avoid charging a high security deposit, as too high an amount might end up costing them good tenants.
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Keep The Security Deposit in A Separate Bank Account
A good idea is to keep the deposit in a separate interest-bearing bank account instead of your regular bank account. According to Philadelphia landlord-tenant law, if the amount exceeds $100, landlords are to keep money in a federally regulated institution or bank. They are also required to send a receipt to tenants within 30 days of receiving the payment.
In addition, they should also provide tenants with the details such as the name and address of the bank where money is kept. Maintaining a separate bank account also prevents the commingling of your personal and business funds.
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Conduct Move-in And Move-out Inspections
Rental owners should conduct rigorous move-in and move-out inspections to identify all possible instances of damage to the property and the cost of the corresponding repairs. If the damage is inflicted by the renters, you may charge a penalty, or deduct the equivalent money from the deposit. However, according to Philadelphia state law, you will need an inspection report showing such damage before deducting the amount.
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Maintain Proofs of Damage and Maintenance
Document every proof of damage that you notice and repair as it will come in handy while estimating repair costs and claiming compensation. Click photos or record a video as you conduct inspections. You can attach these to the inspection report and share them with the tenant as well.
Maintaining a record of maintenance requests, the receipts of the repairs, and invoices of any other purchase that you make per your tenants’ requirements from the rental are also essential in case your tenant claims that they have not caused any damage or requested any repairs.
Note that, if tenants have occupied the place for at least two years, you, as the landlord, are required to pay interest on the security deposit commencing from the third year (25th month) of occupancy. 1% of the amount can be deducted for covering custodial and administrative costs.
Landlords in Philadelphia should consult a local lawyer to know more about the local security deposit laws.
At TCS Management, we assist landlords in effectively dealing with all the concerns related to tenant security deposits. Our years of experience ensure that you get apt legal and property advice for your rental issues. For more details, contact us at TCS Management.
