Almost 54 percent of households in Ocala are renters. As a landlord, you have many tasks to juggle when navigating this dynamic market. One important part of managing your rental property is the security deposit for rent.
Florida has laws that regulate security deposits. Following these regulations helps protect your property. You're also protecting yourself against tenant complaints or legal action.
Learn more about security deposits with three tips that will help you manage the security deposit process.
What Is a Security Deposit for Rent?
The security deposit is money that landlords can request from tenants before a tenant moves in. It serves as security against property damage to the rental unit. The lease agreement should spell out the terms of the security deposit.
The landlord usually returns the money to the tenant when the tenant moves out. However, the landlord can withhold all or part of the deposit under certain conditions.
A security deposit isn't the same as an application fee, transfer fee, or move-in/move-out fee. Florida law regulates security deposits differently. Following our three tips will help you comply with the legal requirements.
1. Charge the Right Amount
Unlike some other states, Florida law doesn't limit the amount of money landlords can charge for security deposits. Landlords usually don't charge more than the equivalent of two months' rent, though.
If the security deposit amount is too high, your property is less competitive. You have more difficulty filling vacancies. A reasonable security deposit gives you a cushion against excessive property damage without driving potential renters away.
2. Hold the Security Deposit the Right Way
Florida law gives you three options for holding a security deposit:
- Non-interest bearing account
- Interest-bearing account
- Security bond
The security deposit doesn't technically belong to the landlord. The landlord holds the deposit as a loan while the tenant lives on the property.
Non-Interest Bearing Account
You can store your tenant's security deposit in a non-interest-bearing account. The account needs to be with a Florida banking institution. The landlord must not combine the deposit with any other money or use it before it's due to go back to the tenant.
You can choose to store the security deposit in an interest-bearing account. The account must be with a Florida bank, and you can't commingle the money with other funds.
You have two options for handling the interest. You can give or credit the tenant 5% simple interest each year. The other choice is to give or credit the tenant at least 75 percent of the annualized average interest from the account.
The final option for holding a security deposit is to post a security bond. The surety company must be licensed in Florida. You post the security bond with the circuit court clerk in the county where the rental is located.
The amount of the security bond should be the total amount of the security deposit or $50,000, whichever is less. The landlord must pay the tenant 5% simple interest per year.
3. Notify the Tenant
You must notify the tenant when you receive the security deposit and again if you're going to take deductions from the deposit. You need to send the first written notice within 30 days of receiving the deposit and deliver it by mail or in person.
If you'll be taking deductions from a rental deposit, you have to notify the tenant within 30 days of the date of the lease termination. You must send the notice using certified mail.
Handling Tenants' Security Deposits Correctly
Handling the security deposit for rent is just one of many tasks you're responsible for as a landlord. Florida law regulates the security deposit process, so you need to be sure you're managing the process correctly.
A full-service property management firm like Ocala Property Management Experts will take the hassle and the guesswork out of your security deposits. You can be sure you're within the law, protecting your property, and attracting quality tenants.
Contact us today to experience the difference our property management experts can make.