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The Security Deposit is Not Rent !

What Do I do When my tenant wants to use the security deposit as rent?

By John Nuzzolese

So your tenant asked to use the security deposit as rent? This happens to landlords everywhere every day. The rent isn't paid, you ask for the rent and the tenant says, "We don't have the rent. Take it from our security deposit." ... or ... "We are moving - you'll just have to use our security."

Most landlords are caught off guard and are dumbfounded when this happens. Beware, you'll find this is a common tenant tactic in the landlord business.

How can you be prepared to deal with this situation? First, it is very important that your rental agreement contains a good security deposit clause, like the LPA Lease does. I believe it is very important to read the lease to the tenant before the tenant signs it. The Security Deposit clause explains how security money may not be allowed to be used as rent. That's when I warn the tenant against trying to use the security deposit as rent.
These are the key points on this issue I try to make very clear to the tenant:

  • Security is to be kept in a special escrow account for the entire term of the tenancy.
  • Security legally may not be used by the landlord for any reason other than physical or financial damages as a result of the tenant's failing to comply with the lease contract AFTER the tenant has vactaed the property.
  • Failure to pay rent is cause for eviction which will result in the destruction of your credit rating.
  • Your lease agreement states that security deposits are not to be used as rent, so if you ask me to do that, you would be breaking your contract and your word.
  • If your word and signature are no longer good, then I may not believe anything you say about when you want to leave, so I'll be forced to begin legal action.
  • In the event you default on your rent, you are responsible for my late fees, collection costs and attorney fees.
  • I also remind them about The Credit Reporting Disclosure Notice I just had them sign that says I intend to report positive and negative payment history to the credit and tenant reporting bureaus.

I've been able to counter this particular type of "tenant attack" by being ready with the right comeback:
Tenant: I don't have the rent this month. You're going to have to take it from our security deposit.
Me: That's too bad. I hope you remember the consequences you agreed to in your lease.
Tenant: Oh yeah? What's that?
Me: Security is not to be used as rent... ever. Non-payment of rent is a breach of this lease subjecting you to late charges, delinquency credit reporting, attorney fees, etc. Do you really want to incur all these charges, ruin your credit so you'll no longer qualify for loans or credit cards and have to go to court over your last months rent???
Tenant: No. Thanks for setting me straight.

OK, the tenant doesn't usually say that. He may say a few things I don't want to print on this site, but will usually snap back in line. Sometimes the tenants will bluff to see what you will do, but when they receive an attorney's letter that shows you weren't kidding, they should pay up and follow the rules.

Try to remember these points or have this page ready to refer to in case the tenant pulls the old "Use my deposit as rent" trick.

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