When searching for a rental property, there’s a lot to learn that you may not know unless you stumble upon it.
One crucial aspect is the different types of deposits. Many renters assume only one refundable kind exists, but this is not how it is. Landlords may require several deposits, and they can be non-refundable.
The sums can be significant, and landlords may insist you pay them to secure the property.
Let’s examine the various types of deposits and identify which ones are refundable and which ones are not.
Security deposit
This is probably the most popular deposit among landlords and tenants.
That’s because every landlord whose property complies with the law requires a security deposit. This rental fee is used to cover any damage that could be done to the property while you live there.
The regular damage done over time (also called “wear and tear”) is not included in this deposit, and you won’t have to pay for it. This deposit should cover all kinds of damage that could be done to the property intentionally or accidentally.
This is why the amount of money you’ll have to give is quite considerable.
The sum can vary depending on the landlord and the rental property, but it typically equals one or two months’ rent. This is also the only fee refundable, provided there’s no damage at the end of the lease.
It’s important to note that a security deposit is not the same as the last month’s rent. The former is meant to cover damages, while the latter is meant to cover the final 30 days of your stay.
In some cases, landlords may ask you for a security deposit and the last month’s rent upfront.
Application fee
The application fee is the second most common type of fee the landlord can ask you to pay, and it’s not refundable.
This fee covers the landlord’s expenses for all the paperwork he uses to check your credit, references, criminal background, and employment details.
These things usually cost the owners money, and some prefer you to compensate them. If you decide to pay this fee, it could also show the landlord how serious you are about taking place.
Advance rent deposit
The advance rent deposit is used when you want the landlord to keep the apartment for you while you go through the application process.
This fee is very useful if you find a place you like and want it to be yours at any cost.
The good side of the advance rent deposit is that if your application for the apartment is approved, it will be then used to cover the first month’s rent. The bad side is that you’ll lose your deposit if your application is rejected or you decide not to take the apartment.
Cleaning deposit
Sometimes, landlords may demand a cleaning deposit along with a security deposit.
Typically, the cleaning deposit is part of the security deposit. However, there are times when landlords charge separately for a professional end of lease cleaning service, making the cleaning deposit non-refundable.
This approach is increasingly uncommon as tenants now hire professional lease cleaners to guarantee a smooth move-out check when the lease expires.
If you’re responsible for end of lease cleaning, budget for it separately from your cleaning deposit.
Hiring a professional service can simplify the process and ensure you comply with the legal requirements for end of lease cleaning.
Pet deposit
This deposit is also not so common.
It’s usually required by landlords who allow pets on their property. The deposit is used to protect the landlord from any potential damage that could be done to the apartment by the pet.
Of course, cleaning after a furry member of the household can be much easier if the property has hardwood floors.
The amount depends on the size, number and type of the pet or on how well-trained it is. This deposit is not refundable. The most curious thing about this fee is that it can be brought as a clause in the lease agreement at any time.
If you bring the pet in the middle of the lease, you’ll still have to pay for it.
Holdover deposit
A holdover deposit may be necessary if you overstay your lease term without prior approval from the landlord.
This type of deposit aims to incentivise tenants to move out on schedule and compensate the landlord for any losses incurred due to the holdover. The specific amount of the holdover deposit can vary depending on the landlord and the rental property.
Remember that unauthorised tenancy after the lease term may result in legal action against you. You may be held liable for expenses, rent, and damages incurred by the landlord during the holdover period.
Key deposit
Landlords may also request a key deposit from tenants.
The purpose of this deposit is to cover the expenses of replacing keys or locks if they are lost or damaged while the tenant is occupying the property.
The amount of the key deposit can differ, depending on the landlord and the number of keys provided to the tenant.
It’s essential to differentiate this from an application fee, which landlords charge for processing rental applications.
Final thoughts
When renting a property, it’s essential to know that landlords may ask for several types of deposits, not just one.
This article has highlighted the seven most basic types of deposits that a landlord may require. It’s essential to understand what each deposit is for to avoid any surprises when you move in or out.
Don’t be afraid to ask your landlord or real estate agent if you have any questions or concerns.
When you’re searching for a new place to live, it’s also important to budget for these deposits and the first month’s rent. These deposits can be substantial, and not factoring them into your budget can lead to financial difficulties later.
So, plan accordingly and include all the necessary expenses when calculating how much you can afford to spend on rent.