Most landlords require tenants to pay a deposit before moving in, usually at the time they sign a lease or rental agreement. If a tenant damages the property or leaves early owing rent, the landlord can use the deposit to cover what the tenant owes. State security deposit laws provide specific details as to the maximum amount of the deposit, how it may be used, and when it must be returned. Here's an overview of the basic issues.
Most states limit the amount a landlord can collect as a deposit. It's usually one or two months' rent, but this may vary depending on whether or not the rental is furnished , whether the tenant has a pet, and the number of rental properties the landlord owns (smaller landlords may be exempt from state deposit limits).
Some states allow landlords to collect nonrefundable fees—such as for cleaning or pets. A few states, including California, prohibit landlords from charging any fee that is not refundable.
Most states do not require landlords to pay tenants interest on deposits or put the money in a separate bank account. The states that do have laws on the subject are very specific as to the amount of interest and when it must be paid.
Most states allow landlords to withhold all or part of the tenant's deposit to cover unpaid rent; damage to or cleaning of the rental unit (above what's known as "ordinary wear and tear"); and replacing property a tenant has taken, such as furniture that the landlord provided. Landlords should not use the deposit to cover damage that was present at the start of the tenancy. Also, the longer a tenant has lived in a rental unit, the more wear and tear can be expected on things like carpets and walls.
Landlords usually have a set amount of time to return security deposits (generally it's between 14 and 30 days). Many states require landlord to give tenants a written itemized statement as to how the deposit has been applied toward back rent and costs of cleaning and damage repair. In some states, landlords must allow tenants the opportunity to respond to proposed deductions before actually making them.