In South Carolina, the collection and return of security deposits are primarily regulated under the SC Code § 27-40-410. These laws provide a set of rules that South Carolina landlords and property managers have to follow to protect all parties.
Maximum Security Deposit Charge in South Carolina
In South Carolina, there are no limits on how much a landlord may charge as a security deposit (or pet fee) as long as it is stated in the lease agreement. Landlords generally charge between one and two months’ rent as a security deposit. It is important to note that South Carolina’s city and county laws may have set a cap on the amount of a security deposit for residential properties.
Additional Pet Deposits. Under South Carolina’s law, the landlord may ask for an additional pet deposit. However, people with disabilities who use service animals are entitled to full and equal access to housing. Thus, the tenant may not be discriminated against and the landlord may not require the tenant to pay extra to have a service animal. If the service animal causes damage to the rental unit, the tenant is liable to pay for any damages.
The Federal Fair Housing Act requires housing facilities to allow tenants who use service dogs and emotional support animals to have an equal opportunity to use and enjoy their home.
Allowable Deductions on Security Deposits in South Carolina
The landlord may use the security deposit to make deductions only after the tenant has vacated the premises. The security deposit should be used to cover:
- Unpaid rent.
- Costs of damage caused by the tenant’s failure to comply with obligations as a tenant but not those considered to be standard wear and tear.
Can the deposit be used by the tenant as last month’s rent? The deposit may be used as the last month’s rent only if both parties agree in the lease agreement. Otherwise, the security deposit should be handled separately from any rent balance left outstanding.
“Normal Wear and Tear” vs. Damage in South Carolina
- “Normal Wear and Tear” is defined as deterioration that occurs as a result of use for which the rental unit is intended and without negligence, carelessness, accident, or misuse or abuse of the premises or contents by the tenant or members of his household, or their invitees or guests. It can include minor issues, such as gently worn carpets, loose door handles, fading wall paint and flooring, stained bath fixtures, lightly scratched glass and dirty grout that occur naturally as a result of the tenant using the property as it’s designed to be used.
- “Damage” refers to destruction to the rental unit that occurs because of abuse or negligence by a tenant during the course of the tenancy and can affect usefulness, value, normal function of the rental unit. Pet damage (heavily stained and ripped carpet), broken tiles, hole in the wall, broken windows and missing fixtures are all examples of damage.
Check out our article on wear and tear vs. damage to get a better idea of the difference.
Under South Carolina law, tenants are responsible for the following:
- Complying with all building and housing codes affecting health and safety.
- Keeping the rental unit and all furnishings clean and safe, including all plumbing fixtures.
- Disposing of garbage and other waste in a clean and safe manner.
- Using all facilities (e.g., electrical, plumbing, heating, etc.) and appliances reasonably.
- Conducting themselves and their invited guests in a manner that will not disturb other tenant’s peaceful enjoyment of the premises.
- Not negligently or deliberately destroy or damage the property and leave the damage unreported.
- Leaving the premises in the same condition it was in when it was handed to the tenant.
If the damage to the premises was caused by the tenant’s failure to comply with any of the above, then the landlord may take the cost of repairing it from the security deposit. The landlord may adopt new rules or regulations, and are enforceable if it concerns the following:
- The purpose of the rule is to promote the convenience, safety, or welfare of the tenant in the premises, preserve the landlord’s property from abusive use, or make a fair distribution of services and facilities.
- The rules are reasonably related to the purpose for which they are adopted.
- They apply to all tenants in the premises.
- The tenant has notice of them at the time of entering into the rental agreement.
- They are sufficiently explicit in their prohibition, direction, or limitation of the tenant’s conduct.
- They are not for the purpose of evading the obligations of the landlord.
Returning Security Deposits in South Carolina
Time Frame: A South Carolina landlord has 30 days to return any unused portion of the security deposit along with a written itemized list of damages deducted. This period begins on the later of the date of termination presented in the lease agreement or the tenant’s demand of its return.
Forwarding Address: The tenant must provide the landlord with a forwarding address, in writing, which may be used to send the statement and returned funds back to the tenant. If no address is provided, the landlord will mail it to the last-known address without being responsible for damages resulting from late return or nonreceipt.
Failure to Return Security Deposit as Required: If the landlord refuses or fails to return the security deposit within the 30-day limit, the tenant stands to recover up to the triple the withheld sum, plus any legal fees associated with recovering the deposit in court. The tenant may sue in terms of their security deposit in South Carolina’s Magistrate Court up to a maximum amount of $7,500.
Security Deposits and Tax Filing in South Carolina
Whether a security deposit will be treated as taxable or not depends on if the deposit is used or returned.
Taxable Income: Security deposits are not automatically considered income upon collection at the beginning of tenancy. They only become taxable income when the landlord no longer has any obligation to refund them (such as for settling damages incurred). At this point they may also qualify as a write-off for tax purposes as well.
Reporting Security Deposit as Income: Whether or not security deposit should be reported as income and when to do so will depend on what it is being applied to or used as. Below are three simple rules the IRS has suggested to follow:
- If the deposit is forfeited due to a breach of the lease or applied to unpaid rent, then the amount kept should be declared as income in the year it was forfeited or applied.
- If the security deposit is used to cover expenses that are chargeable to it, then the landlord should only include the part of the deposit used as income if the landlord includes the cost of repairs as expenses. If the landlord doesn’t include them as expenses as a matter of practice, then there’s no need to include the part of the deposit kept to cover them as income.
- If there is an agreement between the parties to use the deposit or part of it as the final month’s rent, then the landlord should include it as income when the same is received.
Additional Rules & Regulations in South Carolina
Receipt Requirements: The landlord is not required to provide a receipt for the security deposit in South Carolina.
Security Deposit Holdings in South Carolina: South Carolina laws do not require landlords to hold security deposits separate from other funds.
Security Deposit Interest in South Carolina: South Carolina laws do not require landlords to provide interest on held security deposits.
Security Deposit Inequality in South Carolina: In cases where a landlord rents four or more adjoining units with different security deposit demands, the landlord is required to disclose their standards for calculating the amount of security deposit they collect. It should be included alongside the lease agreement and when collecting the security deposit.
If the landlord fails to provide this notice, the difference between the proposed security deposit and the lowest security deposit charged for a similar unit on the premises may not be used for deductions at the termination of tenancy.
Security Deposit in Regard to Fire or Casualty Damage: If the premises is damaged or destroyed by fire or casualty to the extent that it is substantially impaired, the landlord shall return the security deposit funds. However, the landlord may withhold the tenant’s security deposit if the fire or casualty was due to the tenant’s negligence or otherwise caused by the tenant.
New Property Owner’s Responsibility: If the original landlord decides to sell or transfer ownership of the rental property, they must:
- Transfer the security deposit to the new owner and notify the tenants of the new owner’s name and address; or
- Return the security deposit to the tenant.
For additional questions about security deposits in South Carolina, please refer to the official state legislation, South Carolina Landlord-Tenant Statutes.