Creating a Secure Deposit Agreement for Tenants

Note: Want to skip the guide and go straight to the free templates? No problem - scroll to the bottom.
Also note: This is not legal advice.

Introduction

Creating a secure deposit agreement for tenants is an important part of any rental agreement. The Genie AI team understands this and believes that all landlords and property management companies should take the time to create a secure deposit agreement tailored to the specific needs of the landlord and tenant, while also being in compliance with relevant laws and regulations.

The security deposit agreement is beneficial for both parties, protecting the landlord’s interests in case of default by the tenant, as well as providing clarity and security for tenants who will be able to get their security deposits back at the end of their lease. To ensure that all payments and obligations are clearly established, it is important to consider a variety of factors such as legal compliance, clarity, specificity, types of security deposits held (cash or surety bond)and writing in plain language that both parties can understand.

For landlords hoping to draft an effective security deposit agreement there are important legal requirements which must be adhered too; these include laws regarding security deposits, tenant rights law and landlord-tenant law. Each jurisdiction may have different rules concerning each type of security deposit so it’s vital to stay up-to-date with all relevant legislation. Furthermore it is essential that any written agreements use plain language which can be easily understood by both parties - using overly technical or legal jargon could lead to confusion or disputes further down the line.

The Genie AI community template library provides millions datapoints which teach its AI what a market-standard secure deposit agreement looks like; meaning anyone can draft high quality legal documents without having to pay a lawyer. With step by step guidance below on how you can access our free templates today – you don’t even need an account – anyone can get started creating their own secure deposit agreements with ease!

Definitions (feel free to skip)

Security Deposit: A sum of money that a tenant pays to their landlord at the beginning of a lease agreement to protect the landlord’s property in the event of damages or unpaid rent.
Lease Agreement: A written contract between a landlord and a tenant that outlines the rights and responsibilities of each party.
Unpaid Rent: Rent that has not been paid by the tenant by the agreed upon due date.
Unpaid Utilities: Utility bills that have not been paid by the tenant by the agreed upon due date.
Interest Payments: Additional money paid to the tenant in addition to the security deposit.
Documentation Requirements: Information that the landlord must collect and record, such as tenant name, address, phone number, and Social Security number.
Security Deposit Agreement: A written agreement that outlines the terms of the security deposit, including payment terms and conditions of return.
Penalties: Punishments or fines imposed on landlords who fail to comply with security deposit regulations.
Dispute Resolution Procedures: Steps taken to resolve disputes between landlord and tenant, such as attempting to resolve the issue amicably or through legal action.

Contents

• Definition of Security Deposit
• Reasons for Requesting a Security Deposit
• Damage to Property
• Unpaid Rent
• Unpaid Utilities
• Amount of Security Deposit
• Terms of Security Deposit Agreement
• Interest Payments for Security Deposits
• Documentation Requirements for Security Deposits
• Collect and Record Tenant Information
• Sign and Date a Security Deposit Agreement
• Responsibilities of the Tenant and Landlord
• Tenant’s Responsibilities
• Pay Security Deposit
• Notify Landlord of Address Changes
• Provide Access to Property for Inspections
• Landlord’s Responsibilities
• Provide Written Notice of Security Deposit Amount
• Provide Written Notices of Deductions
• Provide Written Notice of Deposit Refund
• Return of the Security Deposit
• Provide Written Notice of Security Deposit Refund
• Provide Refund within the Allotted Timeframe
• Dispute Resolution Procedures
• Notify Landlord of Security Deposit Disputes
• Attempt to Resolve Disputes Amicably
• Seek Legal Advice and/or File a Lawsuit
• Penalties for Non-Compliance
• Financial Implications
• Legal Action

Get started

Definition of Security Deposit

• Understand the legal definition of a security deposit in your state
• Research the maximum amount you can legally charge for a security deposit
• Research other laws that apply to security deposits in your state
• Determine the amount of security deposit you will charge for the rental property
• When you have determined the amount and understand the legalities, you can check this step off your list.

Reasons for Requesting a Security Deposit

• Understand why a landlord may ask for a security deposit from a tenant. Common reasons include to cover damage to property, unpaid rent, and other unpaid fees.
• Consider the terms of the security deposit agreement, including when the deposit is due, the amount of the security deposit, and when and how it will be returned.
• Determine what the tenant is responsible for in regards to the security deposit and what the landlord is responsible for.
• When complete, make sure you have a written agreement that states the terms and conditions of the security deposit.

How you’ll know when you can check this off your list and move on to the next step: When your written agreement is finalized, you will be able to move on to the next step.

Damage to Property

• Specify the conditions for returning the security deposit in full, such as if no damage has been done to the property
• Outline the procedures for the tenant to follow in the event of any accidental damage to the property
• Make sure the tenant understands that any intentional damage to the property must be repaired at the tenant’s expense
• If applicable, include a list of items that must be checked for damage upon move-out
• Include a signature line for the tenant to sign and date the agreement

You can check this step off your list once you have specified the conditions for returning the security deposit in full, outlined the procedures for the tenant to follow in the event of any accidental damage to the property, and made sure that the tenant understands that any intentional damage to the property must be repaired at the tenant’s expense.

Unpaid Rent

• Include details on the tenant’s responsibility to pay rent on time and in full each month
• Specify the amount of the security deposit and how it will be applied to unpaid rent
• Specify any late fees that will apply if rent is not paid by the due date
• Specify any consequences for unpaid rent, such as eviction and collection efforts
• Specify if the tenant is required to have renters insurance

You can check this off your list and move to the next step when you have included all relevant details on unpaid rent in your security deposit agreement.

Unpaid Utilities

• Determine whether or not utilities (water, electric, gas, etc.) will be included in the rental agreement.
• If utilities are included, determine who is responsible for paying the utility bills.
• If utilities are not included, make sure the agreement includes information on utility providers and how the tenant can set up accounts.
• If the tenant is responsible for utility payments, include a clause that states that unpaid utilities are the tenant’s responsibility.
• If the landlord is responsible for utility payments, include a clause that states that the tenant is liable for any unpaid utility bills.
• Make sure the agreement clearly states who is responsible for any unpaid utility bills.

You’ll know when you can check this off your list and move on to the next step once all of the information regarding unpaid utilities has been included in the agreement.

Amount of Security Deposit

• Determine the amount of the security deposit based on the cost of the monthly rent.
• Consider if you will require an additional pet deposit if applicable.
• Specify the amount of the security deposit you will require in the agreement.
• When complete, you can move on to the next step of creating the security deposit agreement.

Terms of Security Deposit Agreement

• Determine the terms of the security deposit agreement between the tenant and the landlord.
• Include details such as when the security deposit must be paid, when it can be refunded, and the conditions under which it can be kept.
• Make sure all applicable laws and regulations are followed, and that all details are clearly stated in the agreement.
• When the agreement is finalized, both tenant and landlord must sign and date the agreement.
• Once the agreement is signed, you can check this step off your list and move on to the next step.

Interest Payments for Security Deposits

• Determine the applicable interest rate for the security deposit
• Draft the language of the agreement to include the interest rate and any other applicable details (e.g. the date on which interest payments will begin, the frequency of payments, etc.)
• Determine the method of payment for interest payments (e.g. check, money order, direct deposit, etc.)
• Include the details of the payment method in the agreement
• When the language of the agreement is complete, review it to ensure accuracy and accuracy and compliance with applicable laws and regulations
• Check this step off your list when the language of the agreement is complete and accurate.

Documentation Requirements for Security Deposits

• Draft a security deposit agreement form: This should include the names and addresses of both landlord and tenant, the amount of the security deposit, the purpose of the deposit, and what conditions need to be met for the tenant to receive the deposit back at the end of the lease.
• Have the tenant sign and date the agreement: This is to ensure that both parties have agreed to the terms of the security deposit.
• Give the tenant a copy of the agreement: This should include the same information that is included in the agreement that the tenant signed.

Once you have completed the above steps, you will have all of the required documentation for the security deposit and can move on to the next step.

Collect and Record Tenant Information

• Collect the tenant’s name, address, and contact information
• Record the tenant’s name, address, and contact information in a secure location
• Take a copy of the tenant’s government issued identification
• Record the date the security deposit was paid and the amount
• Take a photograph of the check or other payment used to pay the security deposit
• When all of the above has been completed, you can move on to the next step of signing and dating a security deposit agreement.

Sign and Date a Security Deposit Agreement

• Provide the tenant with a copy of the security deposit agreement
• Have the tenant sign and date the agreement
• Have the landlord sign and date the agreement
• Make a copy of the agreement for the tenant and keep one for yourself
• Check off this step when both parties have signed and dated the agreement.

Responsibilities of the Tenant and Landlord

• Have both parties review and agree on the responsibilities that the tenant and landlord have in regards to the security deposit agreement.
• The responsibilities should include who is responsible for maintaining the property, paying for any damages, who is responsible for any repairs, and who is responsible for returning the security deposit at the end of the tenancy.
• Tenants should be informed that in some cases, the landlord may be able to keep the security deposit if they fail to meet their responsibilities.
• Once both parties have agreed on the responsibilities, they can move on to signing and dating the security deposit agreement.

You’ll know you can check this off your list and move onto the next step once both parties have agreed on the responsibilities outlined in the security deposit agreement.

Tenant’s Responsibilities

• Read and understand the deposit agreement
• Provide a signed copy of the deposit agreement to the landlord
• Pay the security deposit, as detailed in the agreement
• Make sure to get a receipt for the payment from the landlord
• Agree to the terms of the deposit agreement, such as the amount of the deposit, the return of the deposit, and any conditions for its return
• Make sure to keep a copy of the deposit agreement for your records

You can check this step off your list once you have provided a signed copy of the deposit agreement and have paid the security deposit.

Pay Security Deposit

• Obtain a copy of the security deposit agreement from the landlord.
• Read through the agreement and make sure that all the details are correct.
• Sign the agreement and provide a copy to the landlord.
• Pay the security deposit to the landlord.
• Ask the landlord to provide you with a receipt for the payment of the security deposit.

You will know you can check this step off your list and move on to the next step when you have signed the agreement, paid the security deposit, and received a receipt for the payment from the landlord.

Notify Landlord of Address Changes

• Contact the landlord to let them know of any address changes that have occurred since the security deposit was paid
• If an address change has occurred, provide the landlord with the updated address
• Once the landlord has been notified of any address changes, and has been given the updated address, this step is complete and you can move on to the next step

Provide Access to Property for Inspections

• Provide the tenant with a copy of the deposit agreement.
• Have the tenant sign and date the deposit agreement.
• Ensure all information provided in the deposit agreement is accurate and up to date.
• Give the tenant access to the property in order to inspect it.
• Provide the tenant with a list of all rules, regulations, and procedures they must follow while inspecting the property.
• Make sure that the tenant is aware of any safety hazards present on the property before they proceed with their inspection.

Once the tenant has been given access to the property and has been made aware of all relevant information, this step can be checked off the list and the next step can be taken.

Landlord’s Responsibilities

• Draft the security deposit agreement. This should detail the amount of the security deposit, lease terms, and other relevant information.
• Provide a copy of the security deposit agreement to the tenant.
• Record the security deposit amount and any other relevant information in the landlord’s records.
• You can check this off your list once the security deposit agreement is signed by both parties and the security deposit amount is recorded in the landlord’s records.

Provide Written Notice of Security Deposit Amount

• Provide the tenant with a written notice of the security deposit amount, due date, and payment methods.
• Include a breakdown of the deposit amount into rent, damage, and additional charges.
• Make sure to include your name, address, and signature on the written notice.
• You can check this off your list when the tenant has received written notice of the security deposit amount, due date, and payment methods.

Provide Written Notices of Deductions

• Draft a written notice that outlines the terms of any deductions that can be taken from the tenant’s security deposit, such as damage costs or unpaid rent
• Include a description of how the deductions will be calculated, as well as the maximum amount that can be deducted
• Ensure that the written notice includes the tenant’s right to dispute any deductions taken from the security deposit
• Sign and date the document, and provide a copy to the tenant
• You will know that you have completed this step when you have sent the written notice to the tenant.

Provide Written Notice of Deposit Refund

• Prepare a letter to the tenant detailing the amount of the security deposit that will be refunded and the date it will be refunded
• Include the tenants name and address in the letter
• Include the date the tenancy ended and the date the security deposit was received
• Include a breakdown of any amounts to be deducted
• Include the total amount to be refunded
• Sign and date the letter
• Mail the letter to the tenant

Once you have prepared and sent the letter, you can check this off your list and move on to the next step of returning the security deposit.

Return of the Security Deposit

• Provide tenants with written notice of their security deposit refund within 30 days of their move-out date.
• Include a breakdown of how the deposit was used and the amount being refunded.
• If there was no damage to the property, the full deposit should be refunded.
• Include a signed statement from the tenant acknowledging receipt of the deposit refund.
• Once you have provided the tenant with the written notice of deposit refund and the tenant has signed the receipt statement, you can check this off your list and move on to the next step.

Provide Written Notice of Security Deposit Refund

• Issue a written notice to the tenant that explains the amount refunded, any deductions from the deposit, and the tenant’s right to dispute any deductions.
• Include the tenant’s name, address, and how the refund will be paid (mail, direct deposit, etc.)
• Sign and date the notice before sending it to the tenant.
• Keep a copy of the signed notice for your records.
• You can check this off your list when the tenant has received the notice and you have your copy of the signed notice.

Provide Refund within the Allotted Timeframe

• Send the security deposit refund within the allotted timeframe specified in the rental agreement.
• Check that you have the correct address for the tenant to send the refund.
• When the refund is sent, make a note of the date, address and method of payment.
• You have completed this step when the tenant has received the refund, or when the time frame specified in the rental agreement has passed.

Dispute Resolution Procedures

• Create a dispute resolution plan that outlines the steps to resolve disputes between landlord and tenant
• This plan should include how to contact each other, how to respond to each other, and how to mediate any disagreements that arise
• The plan should also provide clear guidance as to who will make the final decision on the dispute
• Make sure to communicate the dispute resolution plan to both the landlord and tenant
• Once both parties have agreed to the dispute resolution plan, you can check off this step and move on to the next one.

Notify Landlord of Security Deposit Disputes

• Notify the landlord in writing of any security deposit dispute.
• Include the tenant’s name and address, the date of the dispute, the amount in dispute, and the grounds for the dispute.
• Include copies of any relevant documents that support the tenant’s dispute.
• Keep a copy of the written notice for the tenant’s records.
• When the landlord has been notified, the tenant can move on to attempting to resolve the dispute amicably.

Attempt to Resolve Disputes Amicably

• Send a letter to the landlord detailing the dispute and your proposed resolution
• Give the landlord an appropriate amount of time to respond (e.g. two weeks)
• If the landlord does not respond, you may need to seek legal advice
• If the landlord does respond, attempt to negotiate a resolution
• If you are able to come to an agreement, ensure that both parties sign the documents and that you receive a copy
• Once both parties have signed the documents, you can check this step off your list and move on to the next step.

Seek Legal Advice and/or File a Lawsuit

• Consult a lawyer who specializes in landlord-tenant law to evaluate your rights and any applicable laws.
• Determine the best course of action to take, whether it is to pursue legal advice or to file a lawsuit.
• Research local court proceedings and filing procedures.
• File the necessary paperwork with the court for a lawsuit if that is the course of action you decide to take.
• Keep records of all documents and filing fees.

You’ll know you can move on to the next step once you have consulted with a lawyer, determined the best course of action, and, if required, filed the necessary paperwork for a lawsuit.

Penalties for Non-Compliance

• Research the laws in your state that relate to security deposits
• Outline the penalties for non-compliance with the terms of the agreement
• Include details such as the amount of money that can be withheld from the security deposit for each violation
• Make sure the penalties are reasonable and align with local laws
• Once you have determined the penalties for non-compliance, you can add them to the security deposit agreement
• You will know when you have completed this step when you have added the penalties to the agreement and they align with the laws in your state.

Financial Implications

• Calculate the amount of the deposit
• Decide whether it should be held in cash or in a third-party account
• Determine if the deposit should be refundable or non-refundable
• Set the terms and conditions regarding refunding of the deposit
• Outline any additional fees that may be associated with the deposit

Once all of the financial implications are calculated, outlined, and decided upon, you can move to the next step of outlining the legal action that may be taken if the tenant fails to comply with the agreement.

Legal Action

• Research the legal requirements for a rental deposit in your state, and make sure you comply with them.
• Draft a legal document that outlines the terms of the rental deposit.
• Have the tenant review and sign the document.
• Create a copy of the document for your records.
• Make sure you store the document securely.

You can check this off your list when you have a signed copy of the document from the tenant, and a copy for your records stored securely.

FAQ:

Q: What is a Secure Deposit Agreement?

Asked by Joseph on April 30th 2022.
A: A Secure Deposit Agreement is a contract between a landlord and tenant, which outlines the terms and conditions of the tenant’s deposit and repayment of it. This agreement is typically used to protect landlords from potential losses due to tenants damaging their property or failing to pay rent on time. It also outlines the tenants’ rights and responsibilities when it comes to their rental payments and maintenance of the property.

Q: What are the differences between UK, USA and EU jurisdictions regarding Secure Deposit Agreements?

Asked by Abigail on February 18th 2022.
A: The UK, USA and EU all have different laws surrounding Secure Deposit Agreements. In the UK, for example, landlords are legally obligated to protect tenants’ deposits in a government-backed tenancy deposit scheme, whereas in the US this is not required by law. In the EU, laws surrounding tenancy deposits vary from country to country. For example, in France, tenants are required to pay up to three months’ rent as a security deposit before they can move in, while in Germany they only need one month’s rent. As such, it’s important to familiarise yourself with the laws in your jurisdiction before signing any agreement.

Q: Are there any other legal considerations to consider when creating a Secure Deposit Agreement?

Asked by Logan on August 26th 2022.
A: Yes, when creating a Secure Deposit Agreement there are several other legal considerations that you should take into account. Depending on your jurisdiction, you may need to include clauses covering late fees, interest rates for unpaid rent, occupancy limits and other rules regarding the tenant’s use of the property. You should also be aware of any local or national laws that may require additional clauses or provisions to be included in your agreement.

Q: Are there any specific requirements for a Secure Deposit Agreement if I’m running a SaaS business?

Asked by Isabella on December 5th 2022.
A: If you’re running a SaaS business then there are some specific requirements that you’ll need to consider when creating a Secure Deposit Agreement. For example, if you’re providing a subscription-based service then you’ll need to include clauses about early termination fees and/or payment plans for customers who cancel their subscription before it ends. Additionally, you may want to include clauses about how data is stored and handled by your company as well as any other specific terms related to your business model or services offered.

Q: What measures can I take as a landlord to protect myself from potential damages or losses due to tenants?

Asked by James on May 3rd 2022.
A: As a landlord, there are several measures you can take to protect yourself from potential damages or losses due to tenants. The most important measure is creating a well-drafted Secure Deposit Agreement which clearly outlines the tenant’s rights and responsibilities as well as any additional clauses or provisions that apply in your jurisdiction such as late fees or interest rates for unpaid rent. Additionally, you should consider carrying out background checks on all prospective tenants before approving their application so that you can ensure they are able to pay their rent on time and maintain your property in good condition throughout their tenancy. Finally, you may wish to consider taking out landlord insurance which will protect you against some types of tenant-related damages or losses such as malicious damage or missed rent payments.

Q: How long does it usually take for a tenant to receive their security deposit back after they leave?

Asked by Sophia on July 12th 2022.
A: The length of time it takes for a tenant to receive their security deposit back after they leave depends on several factors such as how quickly the landlord inspects the property for damages once the tenant has moved out and whether any deductions were made from the deposit due to missed rent payments or damage caused by the tenant during their tenancy. Generally speaking though, most landlords aim to return security deposits within 14 days of the tenant vacating the property but this can vary depending on individual circumstances so it’s important that both parties discuss this when signing the agreement so that everyone understands what will happen once the tenancy ends.

Example dispute

Suing a Landlord over Security Deposit Agreement

• In the event of a landlord not returning a security deposit, a tenant can sue their landlord in civil court.
• The tenant must be able to prove the amount of the security deposit, when it was paid, the terms of the security deposit agreement, and that the landlord failed to comply with the agreement.
• In some states, landlords must provide an accounting of how a security deposit was used. If a landlord failed to do so, this can be used as evidence in the tenant’s favor.
• The tenant can also sue for damages if the landlord wrongfully withheld a security deposit.
• The tenant can seek to recover the full amount of the security deposit, any damages related to the landlord’s breach of contract, and attorney’s fees.
• Settlement could be reached through the court ordering the landlord to return the security deposit, or through an out-of-court settlement in which the tenant agrees to accept a reduced amount in exchange for the landlord releasing any claims against the tenant.
• Damages may be calculated based on the amount of the security deposit, any expenses incurred by the tenant due to the landlord’s breach, and any other costs related to the suit.

Templates available (free to use)

Security Deposit Agreement

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