How to determine a deposit fee? Is it one month rent or a certain percentage?

[Leviofan]

What is the name of your state (only U.S. law)? California

I have property in Memphis TN. Does any one know if there is a law about a deposit that landlord holds from tenants. How does landlord determine what amount as a deposit it should be? Is it legal to charge and charge more some tenants relying on their credit report and background check results?

Thanks

 

[Gail in Georgia]

Are you talking about a "holding fee" (i.e., where a rental unit is taken off the market and "held" for a tenant) or a security deposit? As a general rule a security deposit is often the same amount as a months worth of rent. However, there is no "law" that says it must be this amount.

It is not unusual that tenants with poor credit histories are required to put up a larger security deposit. A landlord who accepts such tenants with, say, sketchy eviction or finance histories is taking a larger risk that rent will be paid as opposed to tenants with more stable credit and/or rental results.

Gail

 

[Leviofan]

Are you talking about a "holding fee" (i.e., where a rental unit is taken off the market and "held" for a tenant) or a security deposit? As a general rule a security deposit is often the same amount as a months worth of rent. However, there is no "law" that says it must be this amount.

It is not unusual that tenants with poor credit histories are required to put up a larger security deposit. A landlord who accepts such tenants with, say, sketchy eviction or finance histories is taking a larger risk that rent will be paid as opposed to tenants with more stable credit and/or rental results.

Gail

Yes I was talking about the security deposit. I wonder if there is anything like an insurance that I can ask my tenants to purchase and that will protect me as a landlord in case tenant defaults on his or her rent?

 

[OK-LL]

What is the name of your state (only U.S. law)? California

I have property in Memphis TN. Does any one know if there is a law about a deposit that landlord holds from tenants. How does landlord determine what amount as a deposit it should be? Is it legal to charge and charge more some tenants relying on their credit report and background check results?

Thanks

In Tennessee, there's no state law limiting security deposits, but check your city and county to see if either has a limit on security deposits for residential rentals.

 

[FarmerJ]

And you are free to require tenants to get renters insurance and to require they provide you with a copy of it in your leases and you can even require that they must give you a copy of the binder before getting keys.

 

[STEPHAN]

It has been very successful for us to make the deposit a little higher than the monthly rent.

This brings a greater awareness to the tenant that the last rent still has to be paid and that a security deposit is not the last rent.

I have even seen some judges here in Florida handling a deposit as if it was the last rent when the amount was the same.

 

[Gail in Georgia]

"I wonder if there is anything like an insurance that I can ask my tenants to purchase and that will protect me as a landlord in case tenant defaults on his or her rent?"

You mean like "deadbeat tenants insurance"? Hardly.

Be a diligent landlord and screen your applicants carefully; require income at least three times the rent, run credit and criminal checks, require rent payments on the first of the month and begin the process of eviction if not received by then.

The problem with many landlords is that they do NONE of the above and then complain that they can't immediately evict tenants who don't pay.

Gail

 

[Leviofan]

I heard these kind of insurances are very popular in the UK and Australia, why there is nothing like that in the USA?