Security Deposits, Fees & Advance Rent

Rental agreements may require you to pay a security deposit, a fee, and/or an advance payment of rent before moving into the dwelling (90.300). You should receive a written explanation of the landlord's conditions for refunding or keeping the deposit if a rental agreement is not signed. Always ask for a receipt when you pay a deposit or fee.

Security Deposits

Deposits may be called a damage deposit, a security deposit, or a cleaning deposit. It is the tenant's money which the landlord holds to cover costs if the tenant breaks some part of the rental agreement (e.g., doesn't pay rent, causes damage, or is negligent in keeping the place clean).

A deposit is, by definition, refundable if the tenant meets clearly specified conditions. The landlord must return the deposit in whole or in part depending on the tenant's compliance with the rental agreement. (See Recovering the Deposit)

There is no limit to the amount of deposit a landlord may require as part of the rental agreement, but there are some limits on when the landlord can charge a new or increased deposit. During the first year of tenancy, a landlord is not allowed to change the rental agreement to require the payment of a new security deposit, or to increase the amount of the deposit. The exception to this is that if the landlord and tenant agree to change the  rental agreement, to permit a pet for example, and the additional deposit relates to that change. After the first year, a landlord can require a new or increased security deposit, but must allow the tenant at least three months to pay that deposit. (90.300(3))

Note:   Some landlords use the term "non-refundable deposit" which is actually a fee.

Protection Against Future Problems

The law does not require the landlord to keep records showing the condition of the rental when the tenant moved in, but it is a good idea for both parties. When you move in, make complete records, including:

• receipts showing you paid the deposit, fees, and anything else you paid
• a copy of any written agreements; and
• a record of the condition of the unit.

Fees

The landlord can charge the tenant a fee for a reasonably anticipated landlord expense,  or as a penalty for breaking the terms of the rental agreement. Fees are different from deposits, and a landlord may not be required to return, or account for, a fee. Some examples of fees are: application, screening, cleaning, pet privileges, parking, and storage, lease cancellation, late rent, bounced checks, etc. If a fee is for a service, a tenant may be able to save some money by persuading the landlord to let him/her perform the service. If the landlord agrees, it should be in writing.

In most cases, you can only be charged a fee once at the beginning or during your tenancy. The exceptions are fees for late rent payment, bounced checks, or any noncompliance with a rental agreement that says you can be charged a fee for noncompliance. (90.302) 

Fees should be noted as such in writing (in the contract, a receipt, etc.), and you should make sure you understand what you are paying as a fee and what as a deposit.

Prepaid Rent

Rental agreements may call for either "a month in advance," or "first and last month in advance," or a "deposit on the last month's rent."

Note:   Sometimes rent may be increased before you pay the last month's rent. You must then make up the difference between the advance rent paid and the new rent.

When you pay "last month's rent" up front, you still pay rent at the beginning of each month, but have already paid for the last month as a kind of deposit. In a lease, it is a good idea to specify when the last month will be. Last month's rent can only be used to pay for rent, and can only apply to the last month of rent, unless the landlord and tenant agree in writing that it can be used to pay for rent for other than the last month. When you move out, the landlord must return to you any unused portion of the prepaid rent that hasn't already been refunded to you. The rules are the same as for deposits regarding  how quickly and with what accounting prepaid rent must be returned (See Recovering the Deposit).

Get itemized receipts for any prepaid rent. If a tenant terminates the agreement early as a result of the landlord's breach of contract all unused prepaid rent may be returned. This rule applies to both leases and month-to-month agreements. (see Tenant Remedies for Lack of General Repairs; Disclosures; Unlawful and Dangerous Rentals)

Tip:  Keep all receipts and clear records so that you know how much has been paid and for what!