When someone is holding onto a couple thousand dollars of your money under the guise of a “security deposit,” you should know all the details. The laws surrounding security deposits aren’t difficult to understand, but they vary greatly depending on the state—or even the city.

Don’t get screwed. We’ll explain everything you need to know. Or, if you want to read the rules for yourself, explore our state-by-state breakdown of security deposit laws.

1. No, your deposit can’t be for 17 months of rent

Depending on state law, the deposit usually can’t exceed more than one or two months of rent. In Massachusetts, it’s simple: the deposit can only be one month’s rent, period. In California, the amount a landlord can demand for a security deposit depends: it’s a maximum of two months’ rent if the place is unfurnished, three if it’s furnished. (California also gets extremely specific about waterbeds—if you have one, a landlord can charge an extra half-month’s rent.)

And, if you have good references and credit, the landlord might only ask for one month’s rent—even if it could legally be more. In Washington, for instance, there’s actually no cap at all.

2. Your deposit must be stored safely

Where will your money be stored? Make sure you receive something in writing that indicates which bank is holding your deposit — or if it’ll be in a bank at all. Like almost everything, rules for storing security deposits depend on the state. In Massachusetts, your landlord should tell you where your money’s being held, plus the interest rate for the account. And if they don’t store your deposit correctly, you’re entitled to get the entire thing back immediately—even if your lease isn’t up!

In New York, your landlord is also legally required to store the deposit in a separate bank account. If they mix your money with their own personal funds, the law says they have to return your deposit immediately. As in many other states, landlords are also required to tell you which bank they’re using to store your deposit.

3. You have the right to earn money from your deposit

In certain states, landlords are required to store your deposit in an interest-bearing account—and that interest is yours to keep. It’s generally not much money, only about 1% in Pennsylvania or even .30% in Los Angeles. But, as a renter, you are entitled to the interest on the account. Sometimes, the tenant can start earning this interest only after renting for several years, depending on local laws and the individual lease.

In New York, landlords only have to store deposits in interest-bearing accounts if their building has six or more units. Even then, your landlord is entitled to keep 1% of the interest for “administrative fees.” Interest rates also vary depending on the location, and often the laws require landlords to use in-state banks. In Massachusetts, landlords have to store deposits in a local bank account that either earns 5% interest, or the bank’s "customary rate.”

We talked to a property manager who told us that almost all of the landlords he knows ignore the interest laws. Instead, they take the interest for themselves because none of their renters understand the law. So it’s up to you to stay informed.

4. A deposit increase may be illegal, even if the rent goes up

What if the rent goes up? Can your security deposit go up, as well? Again, it depends on the state. In Pennsylvania, after five years in a lease, the security deposit can’t be increased even if the rent goes up, but in New York it can.

5. You might have the right to a walkthrough to check for damages

A landlord will typically take photos or record video at the beginning and end of a lease to document the condition of the apartment. The landlord might also fill out a rental condition report that you’ll have to sign. In certain states, this process is even required by law.

At the end of your tenancy, certain states—including New York—give you the right to request a walkthrough of your apartment with your landlord. At the end, the landlord must provide you with a written list of anything you need to repair before you move out to avoid deductions from your security deposit. Same deal in California.

6. Don’t trash the place, because you might get sued

If you do trash the premises and the damages exceed the security deposit, the landlord can sue you for the difference. And if you have any disputes with a landlord in New York, instead of just having things go to court, they make you contact the Attorney General. Good luck with that.

That said, you should definitely understand the difference between actual damages and something called “normal wear and tear.” Basically, a landlord is never allowed to deduct from your security deposit if the issues with the rental were caused by gradual deterioration over time.

7. You have the right to sue for an unreturned deposit

Most states have a law on the books that says when a landlord has to return your security deposit after you’ve moved out of the rental. In California, it’s 21 days. In Illinois, it’s 45 days for big landlords (unless they’re deducting for repairs—in which case, it’s shortened to 30). In Arizona and New York, it’s just 14 days!

If your landlord hasn’t returned your money within the legal timeframe, most states allow you to sue them. Also, if they are running late, generally landlords lose the right to deduct money from your deposit for repairs. But none of this can happen if you don’t provide the landlord with a forwarding address in writing when the lease terminates. You have to give the landlord your new address in writing.

8. Your landlord has to include a list of deductions

If your landlord subtracts any money for repairs before returning your deposit, they’re typically required by law to include a list that explains what, exactly, they deducted for. In Arizona, the list has to be itemized—and if your landlord forgets to include it, then they have to return the rest of your deposit. If you take them to court, they’ll be forced to pay you an additional fee that’s equal to two times your deposit.

9. Residential and commercial security deposits are different

There’s a colossal difference between residential and commercial security deposits. While a residential lease typically runs five pages in length, a commercial lease can be upwards of 50 pages. Commercial security deposits are unregulated, and everything depends on the deal you cut—not state laws written to protect tenants. We spoke to one commercial landlord who told us that “whatever terms you negotiate, you don’t need to put the deposit in an interest-bearing escrow account” — meaning, a bank account held somewhere for safekeeping that earns interest — “unless you use a real estate broker.”

It gets trickier for residential leases: we’re dealing with the state government here, so it changes from state to state. But the gist of it is that the landlord will require a certain amount of money to be held — usually in escrow — to cover any damages that you might cause, and state laws usually protect residential tenants from losing their deposits unfairly.

The most important thing when signing a lease is to know the law. It’s really not that hard to understand—but it’s important that you are aware of the specifics in your state.


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