Fewer landlords are insisting on a security deposit, and are instead coming up with alternative ideas that might help out new tenants who’re struggling to come up with the amount necessary.
Landlords generally insist on security deposits in order to protect themselves against any damage caused to the property, or missed rental payments. But the problem is that the large upfront payment can be difficult for tenants, who’re already spending an average of $3,400 on moving costs according to research from Hotpads.
Another problem with security deposits is they can cause tension if the landlord decides to withhold some or all of it, but the tenant disagrees.
This explains why some states and local governments have passed new laws that limit security deposits. In Seattle for example, the law there limits the amount to no more than one month’s rent. New York has a similar rule.
But landlords can’t be expected to just let tenants move into their properties without some kind of assurance, which is why they’re coming up with alternatives, Forbes reported.
One idea is to give tenants the opportunity to buy surety bonds instead of paying the security deposit. The idea is that the renter pays a portion of the security deposit first of all, with that amount going into a larger pool of funds to cover any damage or rent loss. This is a nonrefundable upfront fee. What this means is that renters can save money when they first sign a lease, but they may have to pay more later on. If landlords find damages from the renter once they move out, the bonding company will pay to fix those damages. They’ll then require the renter to pay for reimbursement.
A second idea promoted by some landlords is to use lease insurance. With this, residents can effectively pay a monthly fee instead of stumping up the full security deposit when they first move in. The tenant pays a small amount each month, and the landlords is covered in case of any damage or missed rental payments.