When you rent out your property to tenants, you’re likely to collect a security deposit. That security deposit is intended to secure fulfillment of all the terms of the lease that you and your tenant signs. It’s different from a damage deposit, which is specific to physical damages done to your property as well as monetary damages such as unpaid rent or utilities.
Most lease agreements reference a security deposit rather than a damage deposit, and for purposes of this blog, we’re talking about security deposits. Washington State has some strict laws around security deposits.
Here are the conditions that are required to effectively and lawfully collect a security deposit from your tenants at move-in.
Know Your Limits: How Much Can You Collect in a Security Deposit?
Several cities in Washington State have limits to what landlords can collect as a security deposit. There is no such state law, however. You can ask as much as you want for a security deposit. Keep in mind, however, that not a lot of tenants will have thousands of dollars in cash at their disposal when they’re moving into a new home. Most of the industry best practices say you should collect a security deposit that’s the equivalent of one month’s rent.
Prepare to Accept a Payment Plan for Washington Security Deposits
As of 2020, Washington State law requires that landlords accept payment plans if their tenant cannot pay the entire security deposit and other move-in costs associated with their new home. Deposits, non-refundable fees (such as pet fees), and the last month’s rent portion of move-in funds can all be paid by tenants over time.
Washington residents who have a lease agreement for a period of three months or longer can elect to pay in three equal and consecutive installments. The first payment would be at the start of the tenancy. You’ll want to create an installment schedule that you and your tenants sign.
Security Deposits are Always Refundable
You cannot charge a non-refundable security deposit. According to the law, fees must be specifically designated as non-refundable. This might be a pet fee or an administrative fee. Security deposits, by nature, are refundable. You are not permitted to declare any portion of your tenant’s security deposit as nonrefundable.
Lease Requirements Around Security Deposits
Washington landlords must disclose in the lease what residents will be required to do in order to receive their deposit back. You’ll need to list the reasons that all or part of that deposit may be withheld. You are not legally permitted to collect a security deposit unless you’re providing a written lease or a written rental agreement.
Include a receipt for the security deposit, with the name and location of the bank where you’ll hold the security deposit. You also need to provide a checklist or a move-in statement that describes and documents the condition of the property at the start of the tenancy.
There’s a lot to consider when it comes to security deposits, and it’s easy to make a mistake.
Don’t make a mistake.
Instead, please contact us at Real Estate Gladiators. We serve Monroe, Issaquah, Bellevue, Everett, Lake Stevens, Kirkland, and other cities in and around King and Snohomish counties in Washington State.
