If you have a rental property on the market, you will require your tenants to pay a security deposit before moving in. Typically this is the value of one month’s rent, and 68% of renters consider this reasonable.
But it’s more complex than just charging a security deposit and walking away. You should know several things about the legal requirements associated with security deposits if you rent to tenants.
So if you’re a new landlord, keep reading to learn more about security deposits and property management in Washington, DC. Here are the top three things to know before getting started.
1. You May Only Charge One Month’s Rent
If you have an expensive property, you may be tempted to charge more than one month’s rent for your security deposit to cover any eventuality. However, in Washington, this is not allowed. Legally, as a landlord in Washington, DC, you may only collect up to one month’s rent as a security deposit.
2. Dedicated Account Required
Another law in the state of Washington regarding security deposits is keeping the money in a dedicated account. This rule comes with a few requirements for the account
- You may not merge the account with any other finances, and it needs to be kept exclusively to store the security deposit
- You need to hold the money in an account in a financial institution within Washington, DC.
- It needs to be an interest-bearing account
3. Pay Security Deposits Back With Interest
The security deposit must be in an account that is an interest-bearing account. That means the money that’s kept in the account must generate interest. This interest needs to be paid to the tenant when their security deposit is returned.
The law states you need to handle the interest very specifically. For one, you calculate the interest as if it started on the date the tenant paid the deposit and not the date the landlord transferred it to a separate account. Secondly, the account needs to accrue a minimum amount of interest. The landlord can keep any interest generated over and above this minimum rate.
4. Up to 75 Days for Returns
Legally, a landlord can take up to seventy-five days to return a deposit. If the deposit is being returned in full, they must return the funds up to forty-five days after the lease ends.
If the landlord decides to withhold part of the security deposit, they have up to forty-five days to notify the tenant by mail about the planned deductions officially. You must return the remaining monies within thirty days of sending that notice.
Understand Security Deposits Like a Pro
Getting up to speed on the laws regarding security deposits can save you a lot of money and hassle in the future. Understanding the rules regarding the account you need to keep the deposit in will help when it comes time to return the deposit in full. If you’ve stuck to the requirements and law requirements, you will be in the clear as a landlord and not out of pocket for anything.
Get in touch today if you’re looking for a full-service property management company to manage your rental collections, lease agreements, and security deposits. We are waiting to show you how we can help with property management in Washington, DC.