Editorial: Make a better system for security deposits

December1cartoonBy the time most people graduate from college they either have experienced, or will soon go through, the process of renting their first home and eventually trying to get their security deposit back. Security and pet deposits are a way for property management companies to provide an in-house safety net against tenant-caused damages instead of relying on insurance companies to pay their part.

On the surface, security deposits seem reasonable: pay a sum of money up front to protect the property owners from damages the tenant may cause and, if renters do not cause damages, they get the money back.

However, the problem is that not all property management companies are willing to return these deposits to their tenants and they keep the money to repair normal wear and tear from living in the home.

This can leave renters frustrated because often it seems the property management company has all the leverage. Hiring a lawyer to help collect the deposit is the tenant’s only real option to fight back, but that could easily cost more than the original deposit.

There is no unified way that property owners handle security deposits, so it’s hard to say that every system is broken. However, generally speaking, the current way that most property management companies handle security deposits is wrong, unfair to the tenant and gives too much leverage to the property owner over their tenant.

The most common form of security deposits is a one-time fee that costs about one month’s rent. Some property management companies specify that the deposit is nonrefundable, and that is far more honest and respectable than collecting a so-called refundable deposit that they have no intention on giving back. Pet deposits also come in many forms. Sometimes they too are a one-time fee, sometimes the company charges an amount per pet, or other times they tack on a monthly pet fee that is also nonrefundable.

When a tenant’s lease is up, the property management company assesses the property to see if the tenant caused any unexpected damage. It is important to specify unexpected damage because security deposits are not intended to cover normal wear on homes from people living in them.

An example of normal wear is light traffic patterns on carpets, especially in areas like hallways. Light traffic patterns on carpets are bound to happen as long as anyone is living in the home and the landlord should expect and plan for them to happen. They are not a reasonable reason to hold someone’s deposit.

However, if the tenant punched a hole through a wall and didn’t repair it, that is a good reason to deduct from the security deposit, but only for the amount that the repair costs. Too often the landlord finds some damage and tries to keep the entire deposit even if the repairs only cost a fraction of what the tenant paid.

Pet deposits are often held in the same way, but even more unreasonably. Many people seem to accept that if renters have pets, they’re going to pay extra money to landlords that they will never get back. But that is a scam. Many people have very well-behaved and housebroken pets that cause no damage to a home. It could even be argued that some pets are less likely to cause damage to a property than small children, but the landlords can’t charge per child because that would be discrimination.

There is a solution to all of this that protects, and is fair, to both parties. Landlords can continue to collect security deposits however they chose; however, renters should have a contract that says the deposit is refundable as long as they comply with the moving-out process. When the landlord comes in to assess the damage, the tenant and landlord should assess the property together and try to agree on what the tenant is liable for.

After the damage is assessed, the property owner should get a quote for the repairs and create an itemized list for the tenant that specifies all the prices. When both parties agree, the tenant should pay the cost of damages and then the landlord should return the entire deposit. Nothing should ever be deducted from the deposit; it should simply be used to protect the landlord from a tenant running out without paying for damages.

This system would also help with pet deposits. Pet owners shouldn’t be punished for having pets. Instead, they should only be charged for damage they, or their pet, caused to the property. If their pets didn’t cause any extra damage, they shouldn’t have to pay an extra money.

Also, both parties should be required to carry insurance. Most landlords insurance if their property is being rented. However, often the insurance only covers damages not caused by the tenant. So, the property owner should require all tenants to keep current renters insurance too.

According to the National Multi Housing Council’s 2012 Apartment Cost Risk Survey, 84 percent of apartment owners require tenants to have renters insurance. That is a great move in the right direction. However, of those 84 percent, 40 percent say they don’t require renters insurance at all of their properties because they are worried the extra $15 a month insurance payment may drive customers away to competitors that don’t require it. Renters insurance is important and protects tenants from greater financial burden.

There is no reason every single landlord and property management company shouldn’t require their tenants to hold it to protect their residents and to help solve the frustrating problem of security deposits.

Bad tenants have burned many in the property management field and it is understandable that the landlords may be a bit jaded toward taking some security measures out of their control. They may argue that it is hard to ensure every tenant has current insurance or that renter and landlord will be able to agree on who is responsible for what damage in a home.

But ultimately, the leverage is still with the property owner. There are many companies now that keep databases of people with current renters insurance for property owners. Also the appearance of honesty is important to a company’s image. Just taking steps to show renters that the company will try to be as fair and honest as possible with their security deposits may do a lot for their reputation and word of mouth advertising.

Ultimately, it shouldn’t matter how many children, pets or anything else a tenant has. They should only be held responsible for the damages they cause due to negligence and poor treatment of the property. If a property management company or landlord wants to find a way to improve their image, or just do the right thing, they should get on board with this idea.