How Do Security Deposits Help Tenants?

Aug 9, 2011 | John Telford | No Responses

Typically when buying or selling a home, each party is represented by their own broker or real estate agent. Occasionally, a real estate broker will act as a dual agent, and when doing so, Oregon law requires all parties to sign a dual agency disclosure. Under these circumstances, the broker must adhere to strict ethical guidelines and never outweigh one party’s interests over the other.

In property management, every transaction is one of dual agency, where the property manager is representing the persons hoping to ultimately lease a home and representing the owners hoping for the best investment and security in their property.

So how does a large security deposit benefit anyone but the property owner? Does requiring a security deposit benefit the tenant in any way? Yes, it does.

A standard security deposit for our region is equal to one month’s rent. When a tenant moves into a home, it is expected and required by law that the tenant leaves the home in the same condition in which they received it, minus normal wear and tear. At the onset of a lease, tenants are eager to do what it takes to get into their new residence, and landlords are cautious to give their rights away to what is often their largest investment. But when it comes time for the tenant to move out, the landlord is eager to regain possession and evaluate their investment and tenants are cautious about how a landlord will respond to their damages, if any.

Both landlords and tenants have the right to remedy disputes in court. But most cases brought on a tenant by a landlord only go as far as a collection agency. A bad rating on a tenant’s credit or rental history can mean the difference between paying the standard one-month security or a second or third month to secure their interest in another rental home in the future. In the long run, it is better for both the landlord and the tenant to require an appropriate security deposit at the time of move-in.

With one-month’s deposit, the landlord, obviously, has access to funds that the tenant will be reluctant to shell out as they’re moving into their new home and out of their old home. The tenant is now in a situation where the landlord does not need to take the tenant to court and cannot file negative information on the tenant’s credit report because they are already holding the monies they feel you may owe them for damages at move-out. If a tenant believes they are being taken advantage of, and that the landlord has assessed damages that are unfair, it is better for the tenant that the landlord has upfront payment for these charges by way of the security deposit. That way, the landlord has no reason to take them to court and has no reason to file negatively on their credit, and yet the tenant can still dispute that security deposit, take the landlord to court, and win the case, all without having had their rental or credit history compromised during the process.

In property management, two reasonably minded people may find themselves with polarizing opinions, creating an inability to compromise on a dispute. It can be frustrating for both parties and regrettable for everyone. Still, in the long term, it’s better for both the landlord whose repairs were fixed and the tenant whose rental history and credit history remain intact, that the appropriate security deposit was collected upfront. A good property manger understands how a security deposit benefits both parties and works as a dual agent. That manager is your best advocate when a security deposit is in dispute.

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