Most landlords in Florida require a security deposit from their tenants to cover property damage beyond regular wear and tear, and to limit the financial loss of tenants breaking their lease early without paying rent. Florida law does not place a statutory limit on the dollar amount landlords may charge as a security deposit, but the equivalent of one month’s rent is typical.
There are other laws that you’ll need to follow when it comes to security deposits and advance rent.
Documenting the Security Deposit
First, you’ll need to disclose in writing whether a security deposit will be held in an interest or non-interest bearing account. Other information you have to provide includes the rate and time of interest payments, and the address of the bank where the security deposit is held. The law requires you to provide this information within 30 days of receiving a security deposit. We recommend you put it into your lease agreement so your tenants can access it before moving in and during the tenancy.
Interest Bearing Accounts and Security Deposits
You need to hold the security deposit in a Florida bank with a local branch office, even if you’re an investor from outside of the state. Security deposits do not need to be held in an interest-bearing account, but if they are, interest payments must be made both annually and at the termination of the tenancy. If you offer your tenants a renewal, you should pay interest on or before the one-year anniversary of the lease being executed.
It’s extremely important that you don’t co-mingle your tenant’s security deposit with your own funds. Make sure you have a separate account set up.
Returning a Florida Security Deposit
Florida law requires landlords to return a tenant’s security deposit within 15 days of move-out if there are no reasons to deduct money from that deposit. If you do plan to make deductions based on damage, cleaning costs, or past due accounts, you’ll have to return the remaining deposit and a detailed accounting within 30 days. Remember that you cannot deduct from the security deposit for normal wear and tear items. Things like small nail holes from where pictures were hung and scuff marks on the carpet from furniture are the responsibility of the landlord.
Accepting Advance Rent
Advance rent is different than a security deposit. It’s money paid by the tenant that will apply to future rental obligations. Some landlords collect advance rent if a tenant has some credit problems or other red flags that show up during the screening process. The idea is that you at least have additional rent in case a tenant stops paying or tries to move out before the end of the lease.
The security deposit, however, is not advance rent and should never be applied towards a monthly rental payment. Do not allow your tenants to use their security deposit as the last month’s rent, for example.
Security deposits are a useful tool for landlords, but they become a problem when the appropriate laws are not followed. To ensure that you comply with the applicable laws as a Florida landlord, you may find it useful to hire a property management company.
If you have any questions, please contact us at Florida Property Management Services. We will be more than happy to help.