If you’re in search of an apartment to rent, there are plenty of exciting things to look forward to, but the process can also bring about a load of questions, especially when it comes to the fees associated with renting. For one, you may be wondering, “what’s the difference between move-in fees and security deposit?” Read on to find out.
|Security Deposit||Move-in Fee|
|1. Cost||100 to 300% of the monthly rent||30 to 50% of the monthly rent|
|2. Regulation||Strictly regulated||Non-regulated|
|3. Nature of the fee||Refundable fee||Non-refundable fee|
|4. Purpose of the fee||Covering of the property damages/unpaid rent/unpaid utilities/breaking of the lease||Costs of the processing and accommodating new renters|
What is a security deposit?
A security deposit is a sum of money that a tenant is required to pay to their landlord or property management company in addition to any other advance rent payments you may have made. One way to look at security deposits is as insurance against unpredictable tenants. Although the landlord/property management company keeps the money during the lease duration, the sum still belongs to the tenant and should be returned in full if they did not cause damage to the property and paid rent each month.
How much is a security deposit?
To get a good idea of how much you can expect to pay as a security deposit, you’ll want to look at where the property is located. This amount is typically dictated by state law and tends to vary widely across the country.
In states such as Colorado, Florida, Illinois, Georgia, Iowa, Indiana, and Louisiana, there are no limits to a landlord’s amount as a security deposit. However, landlords in some states are required to charge a specified amount for a security deposit. In Kansas, for example, a tenant is expected to pay a security deposit that is equivalent to one month’s rent for an unfurnished apartment. For a furnished apartment, you’ll likely pay one and a half months’ rent.
In other states, some laws allow a landlord to tack on an additional amount to the security deposit to cover pets, increased liability, or changes to the property. Some states opt to split the security deposit into different tiers. For example, in Connecticut, tenants under 62 years of age are required to pay two months’ rent as a security deposit, whereas tenants 62 years of age or older pay one month’s rent. In North Dakota, landlords may charge applicants with records of felony convictions up to two months’ rent as security.
Your credit score may also determine how much your security deposit will be. In most cases, the lower your credit score, the riskier you are regarded as a tenant; thus, the higher the amount could potentially be.
When should you pay the security deposit and where does it go?
Just like with the first month’s rent, you are required to pay the security deposit before you move in. The property management company or landlord should provide you with a checklist of all the payments you’re expected to complete (including the security deposit) before you move in. make sure to pay the amount in good time as it can affect your chances of securing the apartment.
Many states have rules about how the security deposit should be handled as far as where the money goes. In most cases, landlords/ property management companies are required to put your security deposit in an interest-bearing account.
Landlords in Massachusetts, for example, must, at the time of receiving the security deposit, provide you with a receipt indicating the amount received, the name of the person receiving it, the date on which the deposit is received, and a detailed description of the property rented or leased. Within 30 days of making a deposit, the landlord must provide you with the name and location of the bank and the amount and account number of the deposit. They must also pay you 5% interest on the security deposit per year (or the amount of interest typically paid by the bank). Interest must be paid yearly and within thirty days of the termination date.
In Florida (where there is no statutory limit on security deposits at the state level), landlords are required to disclose the following information in writing within 30 days of receiving a security deposit:
- Whether the amount will be held in an interest or non-interest bearing account
- The name of the account depository
- The rate and time of interest payments
Interest payments (if any) must be made every year and upon the termination of tenancy. However, landlords shouldn’t pay interest to a tenant who wrongfully terminates the tenancy before the end of the lease term.
What are allowable uses of a tenant’s security deposit?
There are several reasons why a landlord may keep the full amount or a part of the tenant’s security deposit. Keep in mind that this will vary from state to state, but here are the general basics:
- Damage to the property
Any damage beyond the normal wear and tear may be grounds for the landlord not to return the security deposit. Normal wear and tear might include worn-out carpet from regular use and faded paint, whereas considerable damage to the property could include broken appliances, significant stains in the carpet, and large holes in the walls.
- Nonpayment of rent
The total amount or part of the security deposit may be used to cover unpaid rent.
- Unpaid bills
Unpaid utilities or other bills tied to the rental unit may be deducted from your security deposit.
- Wrongful breaking of the lease
Depending on the applicable state laws and the terms of the lease, breaking your lease can result in your landlord keeping all or part of the security deposit.
When do you get your security deposit back?
Assuming you are owed some or all of your security deposit, the landlord/property manager is responsible for giving back the money. Again, stipulations vary from state to state on how long a landlord has before returning a tenant’s security deposit.
In Arizona, for example, landlords are required to return the security deposit within 14 business days from the termination of the tenancy. If any deductions were made from the security deposit following the final property inspection (during which a tenant has the right to be present), the landlord must include a written itemized list with the amount being returned. The itemized list must detail why each deduction was made and the amount being withheld for each incident or repair. In Colorado, a landlord must return the security deposit within a month unless the lease agreement specifies a longer period (which may be no longer than 60 days.
A landlord who withholds a security deposit without reasonable cause or generally doesn’t follow other parts of the state law could be liable if a tenant takes legal action in a small claims court.
Related article: How Much Do Utilities Cost For A Studio Apartment?
What is a move-in fee?
A move-in fee is a non-refundable fee that landlords can opt to charge new renters for occupying their units. The logic behind a move-in fee is that a landlord may use it to make their units better for their tenants, for example, by upgrading appliances or repairing damage caused by previous renters. A move-in fee is typically collected upon signing a rental or lease agreement.
How much are move-in fees?
There is no rule to define how much a move-in fee will cost for a given unit. While a landlord can set this amount somewhat at their discretion, a move-in fee will often equal 30% to 50% of one month’s rent. Therefore, if you’re renting a unit that costs $800 per month, your move-in fee could range anywhere from $240 to $400.
What does your move-in fee cover?
A move-in fee serves to cover the costs that come with processing and accommodating new renters, which might include:
- Deep cleaning the unit
- A new coat of paint
- Adding new appliances or upgrading existing ones
- Reprogramming security systems
- Changing directories
- Creating new keys (such as keys to the unit, building, and mailbox)
Should you agree to a move-in fee?
If the move-in fee is modest, then you may not have too many qualms about paying one, especially if that sum gives you access to a property with top-notch amenities and an apartment that is otherwise affordable given its excellent location.
On the flip side. If the landlord is charging a higher move-in fee (especially if it exceeds 50% of a month’s rent), then you might want to consider looking for a rental that doesn’t charge one.
Can you negotiate a move-in fee?
Though getting a landlord to agree to lower or waive a security deposit is unheard of, you may have better luck with a move-in fee. If you’re a prospective tenant who ticks all the boxes (strong credit, stellar references, etc.), the landlord/property owner you’re dealing with may be eager to get you to sign a lease, in which case they may be willing to negotiate on that move-in fee, or even do away with it altogether. This is especially true if there aren’t too many desirable prospects to choose from.
You can also inquire about what the move-in fee is meant to cover and see if you can negotiate with the landlord in that regard. You may, for example, offer to waive a pre-move in cleaning or a new coat of paint if it means not having to pay a move-in fee.
Related article: How long does it take to move an apartment?
Security deposit vs. move-in fees: pros and cons
Weigh the pros and cons of move-in fees and security deposits as you try to find the best way to proceed.
Pros of security deposits
- They create a sense of responsibility
Tenants are more motivated to take care of their rental unit because they don’t want to lose the hefty sum they paid towards the security deposit when they move out.
- They provide an additional layer of protection for landlords
Collecting a security deposit gives a landlord an additional layer of protection over their investment since they can use the money to repair their property.
A security deposit is refundable if the tenant doesn’t breach the rules and regulations stipulated in the lease.
Cons of security deposits
- Involves complex state laws
Some states have complex laws that are a pain to navigate. For states like Illinois, landlords must understand paperwork and restrictions when accessing security deposits and risk being fined if they violate the rules.
- Tenants may be hesitant to pay
Prospective tenants may balk at the idea of paying a month or two in rent before moving in.
- They might spark disagreements during the final walk-through
Tenants may disagree with a landlord’s findings during a move-out inspection if the latter party determines they need to keep a portion or all of the security deposit to cover damages.
Related article: What Are The Pros and Cons of Renting a Studio Apartment?
Pros of move-in fees
- Affordable and manageable
Move-in fees are typically a lot less than security deposits, so prospective tenants may be more willing to pay this fee to secure the rental unit.
- Move-in fees are easier for landlords to access
In some states, the regulations require landlords to deposit the money received as security deposits into a separate account, making it difficult for them to access the money to make repairs.
- They are non-refundable
Landlords don’t need to refund a move-in fee when tenants move out. From a tenant’s perspective, this is a disadvantage.
Cons of move-in fees
- They don’t create incentive for renters
Since move-out fees are non-refundable, tenants might be less inclined to act carefully with the landlord’s property.
- They might cover the cost of significant repairs
Move-in fees might not cover the costs of major repairs. If a tenant causes significant damage to the property, the landlord might need to file a lawsuit to get more money, which can be stressful.
Related article: Which Is The Best Floor To Live On In An Apartment?
There are several key differences between a move-in fee and a security deposit. While you may want to pay for only one, some landlords may require tenants to pay both, so always inquire. Also, make sure you do your research on state laws so that you’re aware of what to expect.