Security deposits can be used by landlords to cover any outstanding rent after the tenant moves out. This most commonly happens when a tenant mistakenly assumes that the security deposit can be used to cover their final rent payment.
When Can a Security Deposit Be Used to Pay Rent?
The security deposit can be used for any rent that is left unpaid when the tenant moves out. Landlords can also use the security deposit during the lease term if the tenant fails to pay rent. In many states, “rent” includes other associated charges like pet rent, late fees, and utilities.
Security Deposit Is Not the Same as Rent
Tenants often assume that the security deposit they paid up front was to cover the final month’s rent. However, this is legally not the case (unless both parties agreed to it in the lease). A final month of rent is still owed.
A landlord needs the security deposit to remain separate so that they can make deductions for any damage to property. If the tenant assumes the final month can be paid with the security deposit, there won’t be any money left over for the landlord to use to pay for damages to the rental property. They would then have to seek out the tenant to pay for those damages.
When Can’t a Security Deposit Be Used to Pay Rent?
A landlord cannot automatically apply the security deposit to the final month’s rent. The tenant must first be given a chance to pay the rent, even if the rent is paid late. If the tenant moves out and still hasn’t paid rent in full, then the landlord can apply the security deposit to unpaid rent.
If desired, landlords and tenants can agree in writing that the security deposit can be used to cover last month’s rent, but they are not obligated to do so.
Landlords can include a provision in the lease agreement that states that the security deposit cannot be used for the last month’s rent until after the tenant moves out, but this is legally unnecessary.
What Can a Landlord Do if the Tenant Assumes the Security Deposit Will Cover Rent?
Landlords have a few options for handling tenants who don’t pay the rent. This situation commonly occurs when a tenant assumes that the landlord will simply use the security deposit to cover the final month’s rent payment.
Charge Late Fees
As with any other late or nonpayment of rent, landlords are legally allowed to charge late fees. Many states have laws defining how much a landlord can charge, usually either an amount per day or a percentage of the monthly rent.
Report Nonpayment to Credit Bureau
Landlords cannot report late payments to a credit bureau until they are at least 30 days overdue. However, this can be a useful tool to remind a tenant who’s not planning to pay their last month that they will be reported and will see a derogatory mark on their credit.
Take the Tenant to Court
Their are two different reasons a landlord might take a tenant to court for nonpayment of rent, especially in the final month:
- To Recover the Cost of Deductions. Tenants can (wrongly) assume that their security deposit will be used to cover the final month of rent, but that often doesn’t leave money for fixing damage. If the security deposit exactly covers the final month of rent, but then there are $500 worth of damage to the property, a landlord can sue the tenant for those charges if left unpaid.
- To Win a Civil Judgment. In many states, landlords can sue tenants for nonpayment of rent and receive a financial award. For example, in Texas, landlords can sue for up to three times the withheld rent.
Evict the Tenant
A landlord is unlikely to start the eviction process for just the final month of rent going unpaid. It wouldn’t be worth the cost, and the landlord would likely be better off suing the tenant.
However, if the tenant is still in the middle of their lease and hasn’t paid rent, then evicting the tenant is the best course of action.
