What a security deposit can be used for

| Jan 31, 2020 | Landlord/tenant Matters |

It isn’t uncommon for North Carolina landlords to require a security deposit in addition to the first month’s rent before a tenant takes possession of a property. In most cases, the security deposit is meant to pay for any damage that the tenant may cause. However, it is possible that the security deposit will be used to pay any remaining unpaid rent owed during the lease. If the unpaid rent and damages to the property exceed the deposit, then the landlord may charge the tenant additional costs for repairs over and above the security deposit.

Some tenants go into a lease planning to use the security deposit to cover their last month’s rent. However, using a security deposit to pay the last month’s rent can be problematic if the rental rate during the tenant’s time in the home. While the tenant would be required to agree to the new rate as a condition of renewing the lease, he or she typically would not be required to pay any additional security deposit. Essentially, the tenant would pay the old rental rate for the final month of the new lease. Not only that, but any damages to the property would additionally be charged to the tenant.

North Carolina landlords who collect a security deposit may need to keep the money in an escrow account, and there is a chance that the money will accrue interest while being held there. The landlord is allowed to keep any interest accrued by the escrow account.

While landlords may be able to create lease terms that are in their favor, they must still adhere to applicable regulations. If a landlord does not, the tenant might want to meet with an experienced attorney in order to see what remedies are available.

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