Skip to Content

What Every Landlord Should Know About Security Deposits

Handling security deposits is essential to managing your rental property as a landlord. Security deposits provide a level of financial protection for landlords and help ensure that tenants fulfill their lease obligations. However, understanding the laws and best practices surrounding security deposits is crucial to avoid disputes and ensure compliance. In this blog, we will provide seven essential tips for landlords, specifically focusing on the regulations and guidelines for security deposits in Missouri. By following these tips, you can navigate security deposit-related matters effectively and maintain a positive landlord-tenant relationship.

Provide a Written Lease Agreement

A written lease agreement is essential for clarifying the terms and conditions of the lease, including information related to the security deposit. Here are some reasons why it is vital to have a well-defined security deposit clause in a lease agreement:

Clarity and Expectations

A security deposit clause ensures that both parties know the terms and conditions regarding the deposit. It clarifies the amount of the deposit, how it will be used, and the circumstances under which it may be withheld.

  • Deposit Amount: Clearly state the amount of the security deposit required from the tenant. Specify whether the deposit is a fixed amount or a percentage of the rent.
  • Use of Deposit: Outline the purpose of the security deposit, such as covering unpaid rent, repairing damages beyond normal wear and tear, or fulfilling other obligations under the lease agreement.
  • Deposit Return: Specify the conditions under which the tenant’s security deposit will be returned to them at the end of the tenancy, including any deductions that may be made.
  • Deductions and Notification: Detail the procedure for deducting from the security deposit, including the requirement to provide an itemized list of deductions and any supporting documentation within a specified timeframe.
  • Interest (if applicable): If required by local laws, include whether any interest will be accrued on the security deposit and how it will be handled.

Legal Compliance

Including a security deposit clause helps landlords comply with the legal requirements of their jurisdiction. Different states and countries have specific laws and regulations governing security deposits, and having a clause in the lease agreement ensures that the landlord is adhering to these requirements. Include a statement indicating that the security deposit clause is subject to the relevant laws and regulations of the jurisdiction where the property is located.

Protecting Landlord’s Interests

A security deposit clause protects the landlord’s interests by providing a financial cushion against potential damages or unpaid rent. It gives landlords recourse to recover costs associated with repairing damages caused by the tenant or to go toward unpaid rent at the end of the tenancy.

Tenant Accountability

A clear security deposit clause holds tenants accountable for the condition of the rental property. It sets expectations for the tenant to maintain the property, avoid excessive damage, and fulfill their obligations under the lease agreement.

Dispute Resolution

The security deposit clause outlines the process for handling any disputes regarding the deposit. It provides a framework for addressing disagreements and can help prevent conflicts from escalating into legal disputes. 

Move-In and Move-Out Inspections

Include provisions for conducting move-in and move-out inspections to document the condition of the property. Outline the process for noting any pre-existing damages and determining any post-tenancy deductions.

Including a comprehensive security deposit clause in a lease agreement helps protect the interests of both landlords and tenants, promotes transparency, and sets clear expectations regarding the deposit. It is advisable to consult legal professionals or refer to local laws to ensure the security deposit clause complies with applicable regulations in your jurisdiction.

lease agreement

Security Deposit Tips for Landlords

As a landlord, you are responsible for ensuring that your tenant and your property are taken care of. It is also your tenant’s responsibility to take care of your property. Below are some security deposit tips to safeguard you and your tenants. 

Conduct Move-In and Move-out Inspections

Before a tenant moves in or out, conduct a detailed inspection to document the condition of the property. Take detailed notes, photographs, or videos. The inspection will help establish a baseline for comparing when the tenant moves in and when they move out. Provide a copy of the inspection reports to the tenant and keep a copy for your records.

Fair Wear and Tear Assessment

Understand the difference between damage caused by the tenant’s negligence and normal wear and tear. Deductions from the security deposit should only be made for excessive damages beyond everyday use.

Clear Communication

Communicate the expectations regarding the security deposit to tenants. Provide them with a written explanation of the process and their rights and responsibilities.

Keep Security Deposits in a Separate Account

Missouri law requires landlords to keep security deposits in a separate escrow account. This ensures that the funds are readily available when the tenant moves out and helps prevent the commingling of funds. Keeping accurate records of the security deposit account is crucial for transparency and compliance.

Provide a Security Deposit Itemization

When a tenant moves out, Missouri law requires that landlords provide, within 30 days, an itemization of all deductions from the security deposit. This list should include details of any repairs, cleaning costs, or unpaid rent. If deductions are made, provide receipts or invoices as supporting documentation.

Proper Documentation

Maintain thorough records of the lease agreement, move-in inspection report, communication with tenants, and all relevant receipts and invoices. These documents will serve as evidence in the event of a dispute.

property inspection

Familiarize Yourself with Missouri Laws

As a landlord in Missouri, you must familiarize yourself with the state laws regarding security deposits. Missouri has specific laws and regulations regarding tenant security deposits that landlords must adhere to. Here are some key provisions outlined in the Missouri Revised Statutes (Chapter 535: Landlord and Tenant):

Maximum Security Deposit Amount

Landlords in Missouri are allowed to collect a security deposit that does not exceed two months’ rent. This maximum limit ensures landlords cannot charge excessively high security deposits from tenants.

Holding Security Deposits

Security deposits must be held in a separate escrow account by the landlord. This requirement ensures that the funds are kept separate from the landlord’s personal funds and are readily available when the tenant moves out.

Itemized List of Deductions

When a tenant moves out, landlords are required to provide an itemized list of deductions made from the security deposit within 30 days. This list should include details of any charges for repairs, cleaning costs, unpaid rent, or other legitimate deductions. Landlords must also provide supporting documentation, such as receipts or invoices, to justify the deductions.

Return of Security Deposits

Landlords in Missouri must return the tenant’s security deposit, along with any applicable interest, within 30 days after the tenant moves out. If any deductions are made, the remaining amount must be returned within this timeframe. Failure to return the security deposit within the specified timeframe may result in legal consequences for the landlord.

Failure to Comply

If a landlord fails to comply with the security deposit laws, the tenant may be entitled to the return of the full security deposit plus any damages equal to twice the amount that has been wrongfully withheld. This provision encourages landlords to handle security deposits in accordance with the law and maintain transparency in their dealings with tenants.

It’s important for landlords in Missouri to familiarize themselves with these laws and ensure compliance to avoid legal disputes and potential penalties. Additionally, it is advisable to consult with legal professionals or refer to the Missouri Revised Statutes for complete and up-to-date information on tenant security deposit regulations.

security deposits and tenancy law

Wrapping Up

Handling security deposits as a landlord requires knowledge of state laws, clear communication, and proper documentation. By following these essential tips and adhering to Missouri’s regulations, you can effectively manage security deposits, reduce disputes, and maintain a positive landlord-tenant relationship. Remember, being proactive, transparent, and fair in your dealings with security deposits is vital to being a responsible and successful landlord. If you have questions or are looking for a team that is experienced in all aspects of property management, contact Real Property Management Consultants. We are here to help.

We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.

The Neighborly Done Right Promise

The Neighborly Done Right Promise ® delivered by Real Property Management, a proud Neighborly company

When it comes to finding the right property manager for your investment property, you want to know that they stand behind their work and get the job done right – the first time. At Real Property Management we have the expertise, technology, and systems to manage your property the right way. We work hard to optimize your return on investment while preserving your asset and giving you peace of mind. Our highly trained and skilled team works hard so you can be sure your property's management will be Done Right.

Canada excluded. Services performed by independently owned and operated franchises.

See Full Details