Question #1
Question:
I own a small apartment building and I'm really concerned about having a waterbed in
the building, especially on an upper floor. A recent apartment applicant looked like
a great potential tenant, except that he had a waterbed. He told me I couldn't
refuse to rent to him just because his bed might leak. What can I do to protect my
property against the risk of a major waterbed spill?
Answer:
The law doesn't specifically allow discrimination against waterbed owners. It does,
however, provide landlords with some protection. You are allowed to guard against
potential damage by requiring an extra security deposit - equal to one-half month's rent -
of a tenant who owns a waterbed. That is in addition to the normal security deposit
you require of your other tenants.
Of course, if the tenant moves out and the waterbed has caused no damage to the unit or
the building, you must return that waterbed deposit. If there is damage, you must
give the tenant an itemized statement of expenses to repair the damage and a refund of any
excess deposit. The three-week rule for returning or applying security deposits also
applies to this waterbed deposit.
Question #2
Question:
With property values increasing, I'm interested in buying an apartment building.
I've never been a landlord but I know I want to protect my investment. I'm wondering
how much security deposit I could charge to make sure tenants don't trash the place and
leave me in the lurch. Can you help?
Answer:
The amount of a residential property security deposit depends on the length of the
lease and whether the apartment is furnished or unfurnished. Typically, a landlord
asks for a security deposit and some rent up front. State law says the total of rent
and security deposit requested cannot exceed two month's rent for an unfurnished
residential property or four month's rent for a furnished property. If you offer a
six months or longer lease term, you can collect up to six month's rent in advance.
Finding a renter under those terms might be difficult, however.
Once the lease is terminated, a landlord has three weeks to refund any security deposit
or provide the tenant with an itemized statement of expenses and a refund on the balance.
If you don't return a security deposit promptly, you face statutory penalties of up
to $600 in addition to actual damages to the tenant.
By law, a tenant's security deposit may only be used for the following: to compensate the
landlord for unpaid rent; to repair damage inflicted by the tenant or guests, excluding
normal wear and tear; cleaning the unit after the tenant has vacated; and remedying
additional defaults by the tenant. State law does not allow residential landlords to
charge any additional fees. Some landlords have tried charging a separate
"administrative fee," but the courts view any money paid to secure performance
of a residential lease as a security deposit and subject it to the rules I just reviewed.
The decision to purchase rental property is an important one with many legal and tax
implications. I urge you to consult your own legal and tax advisors before making
such a decision.
