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December 13th 2019

A newcomer’s guide to security deposits in the U.S.

Security deposits for rental apartments might be handled differently in places in the U.S. than they are in your home country. The customs and regulations surrounding rentals will vary by U.S. location. Read on for what you need to know.

Nova Credit is a cross-border credit bureau that allows newcomers to apply for U.S. credit cards, phone plans, and loans using their foreign credit history.

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Alison Rogers
Journalist and real estate broker

Security deposits for rental apartments might be handled differently in places in the U.S. than they are in your home country. In Chicago, for example, there is no maximum or minimum security deposit amount. If you’re coming from Australia, where the maximum “bond”— the Aussie phrase for security deposit — is four weeks’ rent, then it might come as a shock when a Chicago landlord asks for two months’ worth. The customs and regulations surrounding rentals will vary by U.S. location. Read on for what you need to know.

When security deposits are due, how they’re held and when they’re returned 

Typically, a security deposit is due at lease signing. The holding of the deposit is usually stated in the lease. Where the money will be placed may be different from what you’re used to. The UK, for example, has “tenancy deposit protection” so that the money is under regulatory protection. In New York City, though, the landlord may keep the money in any New York State bank, as long as it is in an interest-bearing account. When a deposit is returned is also often a matter of local law. In Texas, for instance, a landlord must return a tenant’s security deposit within 30 days of when the tenant moves out, according to legal website nolo.com. 

Some common reasons you might lose a part of your security deposit

Your lease should specify how you need to leave the property at the end of your lease term. A common set of requirements might be to leave the property clean, in good condition, and to repair the damage caused by moving. To get your money back:

  • Clean!

    After move-out, spend time with a broom and sponge. If there is dirt or grime after you’ve gone, the landlord might charge you cleaning fees. Take a time-stamped photo of the clean apartment when you move out in case of a dispute down the line. 

  • Take all your items.

    You might think that leaving a nice set of shelves improves the apartment, but the landlord may disagree and charge you to move the shelves out. 

  • Repair damage.

    Damage that is the landlord’s responsibility (a leaky pipe, for example) should be addressed promptly during your lease term so it doesn’t become a security deposit issue. Fix things that are your responsibility: Rehang doors that are off their hinges, replace broken towel rods, fill holes that are caused by removing wall-mounted TVs.


How to deal with a security deposit when you have a roommate

Your landlord wants a security deposit for the property. The deposit is to cushion the landlord against any damages that you might do to the unit during your tenancy. However, the landlord doesn’t care where the security deposit comes from. You might pay all of it, or your roommate might pay all of it, or you might split the deposit between you. The details are up to you and your roommate. 

To protect yourself, draw up a written agreement that you can keep as a reference. Also, put in that roommate agreement what will happen if one of you moves out. Will the person moving out have to wait until the lease ends to get the return of their security deposit portion? To avoid arguments, plan for the future before you sign the lease. 

Things to watch out for in your rental paperwork

A recent proposed rent reform in India—  where security deposits can run as long as ten months -- included the provision that a landlord give 24-hour notice before entering the property. This is not, however, standard in U.S. leases. Most landlords will retain rights to enter in case of an emergency (imagine that you’re renting an apartment, and your downstairs neighbor reports a leak). Provisions that you do want to beware of are:

1) Automatic rent-passthroughs. Watch out for clauses that say that if your landlord’s property taxes go up, then your landlord can raise the rent by the same amount.

2) Exorbitant late fees. If you pay your rent late, then it’s fair that your landlord charges a late fee —  but it should be a reasonable one. While there’s no hard and fast rule, generally no more than 5% is fairly standard. 

3) Liens (claims) that the landlord can make on your personal property. FindLaw, the legal information directory, notes that it may be unenforceable for the landlord to try to claim your personal property if you’re late on rent, but that it’s “easier on you if that clause isn’t even in the lease.”

When you don’t have a credit history 

You can strengthen your rental application with a number of documents, such as proof of income and character references. Check out our guide to how to rent an apartment in the U.S. Nova Credit also offers products that can help you if you don’t have a U.S. credit history. 

Ask your landlord to use a tenant screening agency such as First Advantage, Intellirent or Yardi. All three are Nova Credit partners, and their platforms can judge creditworthiness using records from select Nova Credit-enabled countries, such as Australia, Canada, India, Mexico or the U.K. 

Our partner The Guarantors is a financial services agency that can help you reduce the upfront costs that you may face renting in the U.S. The Guarantors can act as a co-signer on your lease, helping you get approved for an apartment that you might not otherwise qualify for. 

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