South Carolina landlords have a right to require a security deposit from tenants before they occupy a rental unit. It’s meant to protect a landlord in the event that a tenant causes the landlord a financial loss during the course of the tenancy. Both landlords and tenants should know South Carolina’s security deposit law that governs the landlord-tenant relationship.
Quick Facts for South Carolina
- Maximum Amount: No limit
- Duration for Return: Within 30 days after end of lease
- Penalty for Late Returns: Landlords may not deduct damages
- No Forwarding Address: Tenant forfeits right to claim security deposit
The Purpose of a Security Deposit
Security deposits serve as a safety net for landlords should they suffer financial losses caused by the tenant doing damage to the rental property, or a breach of the lease agreement, or unpaid rent. It ensures that a landlord is compensated for losses and may also incentivize tenants to adhere to their lease obligations in order to secure their security deposit at the end of the tenancy agreement.
Security Deposit Maximum in South Carolina
South Carolina has no statutorily designated limit on the amount of security deposit that a landlord can charge.
Different Security Deposit Calculation Standards
If a landlord rents more than four adjoining units on a premises, and charges tenants different amounts for the security deposit, then, before the rental agreement begins, the landlord should either(SC Code § 27-40-410 (c)):
- Post in a visible place on the premises, or at the place where the rent is paid, a clear statement showing the standards used in calculating the security deposits are calculated, or
- Provide each prospective tenant with a statement showing the standards.
- Failure to Comply: If a landlord fails to comply with the security deposit amount posting requirement, he/she may not deduct damages from a tenant’s deposit for noncompliance.
Returning the Security Deposit
South Carolina landlords must follow certain procedures when returning a tenant’s security deposit (SC Code § 27-40-410 (a)):
- Itemized Statement: When the tenancy is terminated, the landlord must return the tenant’s security deposit, minus any deductions for damages or other money due. The tenant should be presented with a written notice that itemizes the deductions and the charge for each.
- Time-frame: The written notice, along with the remainder of the security deposit should be delivered to the tenant within thirty days after the termination of the tenancy, delivery of possession or demand by the tenant, whichever occurs later.
- Forwarding Address: The tenant is responsible for providing the landlord with a forwarding address or new address, in writing, to which the written notice and the security deposit may be sent. If the tenant fails to provide the landlord with a forwarding or new address, the tenant forfeit his/her right to claim damages. It has to be clear that the landlord had no notice of the tenant’s whereabouts and mailed the written notice and amount due, if any, to the tenant’s last known address.
South Carolina landlords may deduct from a tenant’s security deposit the following:
- Unpaid Rent
- Damage in excess of normal wear and tear
- Other Breaches of the Lease Agreement
Failure to Return Security Deposit
If a landlord fails to return a tenant’s security deposit with the written notice required, the tenant may recover three times the amount of deposit wrongfully withheld, plus reasonable attorney’s fees (SC Code § 27-40-410 (b)).
Last Month’s Rent
A security deposit is not intended to be used to cover a tenant’s last month’s rent, but the provision can be established in the rental agreement.
How to Get a Full Refund of Security Deposit
At the end of the tenancy, a full security deposit can be returned to the tenant if there is no damage to the rental property, rent is paid in full, all charges in the rental agreement are covered.
Security Deposits and Tax Filing
What happens to the deposit at the end of the tenancy determines how it is treated for tax purposes.
- Accounting for Security Deposits: Security deposits are treated as either assets or liabilities when filing taxes. Tenants shouldn’t deduct security deposits as expenses and landlords shouldn’t declare them as income when in escrow intended to be returned to the tenant.
- Security Deposit Write-off: If a landlord withholds part or all of the security deposit for losses, that amount should be included as income when filing taxes. Forfeited deposits should be declared as income.
“Normal Wear and Tear” vs. Damage
- “Normal wear and tear” is deterioration that occurs as a result of everyday use of the rental unit, and without negligence, carelessness, accident, or misuse or abuse by the tenant.
- “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.
Property Change Ownership
If a rental property changes ownership, a South Carolina landlord must do one of two things:
- If the building changes ownership, the landlord must transfer all security deposits to the new owner within five days. Landlords must notify the tenants, by registered or certified mail, of the name and address of the new owner.
- Return the security deposits to the tenants.
Tips for South Carolina Landlords on the Right Practices for Security Deposits
- Charge tenants a security deposit amount that is “reasonable enough” to cushion potential losses
- Return a tenant’s security deposits within a reasonable time-frame after tenancy termination
- Withhold security deposits for unpaid rent, damage that is beyond normal wear and tear and other costs related to a breach of the lease agreement
- Seek damages in legal proceedings if the security deposit is insufficient to cover the losses caused by the tenant
Knowing South Carolina’s security deposit law should be something that both landlord and tenant will find beneficial. Landlords should remain in compliance with the state’s security deposit law. Tenants should adhere to their lease obligations and protect their deposit. South Carolina security deposit law can be found in SC Code § 27-40-410