FAQ: What is a security deposit?
Authored By: Georgia Legal Services Program®
FAQ: What is a security deposit?
- What is a Security Deposit?
A security deposit is money paid by the tenant to the landlord. The deposit protects the landlord if the tenant moves out without making required payments or damages the unit. If the tenant gives proper notice and moves out without owing any rent or damages, the landlord must return the security deposit to the tenant within thirty (30) days. All landlords, regardless of the number of units they own, must return the security deposit within thirty (30) days after the termination of the lease or the surrender and acceptance of the premises, whichever occurs later. If the landlord is retaining all or part of the security deposit because he claims you damaged the unit, he must send a statement specifying the exact reasons why the security deposit is being retained, list any damages, and estimate the dollar value of the damage within thirty (30) days. If you left the unit owing your landlord rent in an amount greater than the amount of your security deposit, your landlord can withhold your security deposit to recover that money without giving you notice.
- What Can Be Deducted from a Tenant's Security Deposit?
All or part of the security deposit may be retained by the landlord to compensate for physical damage caused to the premises by the tenant or members of the tenant's household, pets or guests. A landlord cannot retain a security deposit to cover normal wear and tear. A landlord can also deduct from the security deposit unpaid rent, late charges, unpaid utilities which the tenant is responsible for under the terms of the lease or for actual damages caused by the tenant's breach of the lease or rental agreement. To determine the reasonableness of the charges for repairs, the tenant could talk with reliable sources in the repair business and get estimates from them to compare to the amount charged by the landlord. Generally, the tenant is not responsible for defects that existed before the tenant occupied the premises. The purpose of a move-in inspection is to determine any defects before the tenant moves in. If you signed the move-in inspection list and failed to identify the existing damage, you can be charged for the repair of the damages. If you noted the condition of the apartment on the list at the time of the inspection, the cost of the repair should not be deducted from your security deposit.
- When must the landlord return the security deposit?
If the tenant gives proper notice and vacates without owing any rent or damages, the landlord must return the security deposit to the tenant within thirty (30) days. The thirty days begin to run after the termination of the lease or the surrender and acceptance of the premises, whichever occurs last. This rule applies to all landlords, regardless of the number of units they own.
If the tenant left owing rent or other amounts due under the lease which are less than the security deposit, the landlord can withhold the amount unpaid from the security deposit. If the amount of rent owed is less than the amount of the security deposit, the landlord must return the remaining amount of the security deposit to the tenant with an explanation of why part of the deposit was withheld within 30 days.
If the tenant left owing rent or other amounts due under the lease which are greater than the amount of the security deposit, the landlord can keep the entire security deposit and will not be penalized if he fails to notify the tenant by letter why he is keeping the security deposit. It is still a good business practice for the landlord to notify the tenant why the security deposit is being held within 30 days.
If the tenant moves out and has damaged the unit, the landlord may take out of the security deposit the cost of repairing the unit. The landlord retaining all or part of the security deposit due to damages must give the tenant a statement specifying the exact reasons why the security deposit is being retained. This notice must be sent to the tenant within the thirty (30) day period.
- What happens if the landlord refuses to refund the security deposit even though the tenant satisfied the conditions for refunding the security deposit?
If the landlord refuses to refund the security deposit, the tenant may bring a claim for those monies in the magistrate court or state court where the landlord resides or otherwise has designated a person as his agent of service. A landlord who owns more than ten (10) units or uses a third party to manage the units can be liable for three times the amount of the improperly withheld security deposit plus attorney fees. The landlord may not have to pay treble damages if, the landlord shows that the withholding was not intentional and resulted from an error which occurred in spite of procedures reasonably designed to avoid such an error.
- What do I need to know about security deposits before I sign a lease?
Georgia law establishes an inspection procedure, the purpose of which is for the landlord and tenant to agree on the pre-occupancy condition of the rental unit. Georgia law requires that before the tenant pays a security deposit and moves into the rental unit the landlord must give the tenant a list of any damages to the unit. This list must be signed by the landlord and the tenant. Before signing the tenant is to be afforded an opportunity to inspect the rental unit to determine if the list is accurate or if additional defects need to be added to the list. The tenant must sign the list or specify in writing on the list the items in dispute and then sign.
The move-in inspection discussed applies to landlords who collectively own more than ten (10) rental units including units owned by their spouse and children or who employ a management agent regardless of the number of units owned. Landlords who own fewer than ten (10) units or who manage the units themselves are not required to follow the inspection procedures but may find it helpful in establishing repair needs and responsibilities.
- What do I need to do at the end of the tenancy?
When the landlord want to keep any part of the security deposit to recover for damages he must within three (3) business days inspect the unit and prepare a list of damages. The three days start to run after the termination of the lease or the surrender and acceptance of the premises, whichever occurs later. The landlord must sign the list and provide it to the tenant. The lists must contain written notice of the tenant's duty to sign or to dispute the items listed. The tenant is entitled to inspect the premises within five (5) business days after the termination of occupancy to determine if the list is accurate. If the landlord fails to follow this procedure he can not withhold the security deposit to pay for damages.
The tenant may either sign the move-out inspection list or state why he disagrees with the list of damages. If the tenant fails to sign the list or signs the list but does not object to the damages listed by the landlord, the tenant may not sue the landlord to recover the security deposit. A tenant may only sue the landlord's for withholding damages from the security deposit if the tenant stated that he disagreed with the deduction on the list of damages provided by the landlord and gave it to the landlord.
The move-out inspection discussed applies to landlords who collectively own more than ten (10) rental units including units owned by their spouse and children or who employ a management agent regardless of the number of units owned. Landlords who own fewer than ten (10) units or who manage the units themselves are not required to follow the inspection procedures but may find it helpful in establishing repair needs and responsibilities.
- How Does the Landlord Return the Security Deposit?
The security deposit and any statement which accompany it must be sent to the last known address of the tenant. If it is returned as undeliverable and the landlord is unable to locate the tenant after a reasonable effort, the security deposit becomes the property of the landlord ninety (90) days after it was mailed. A tenant moving out of a rental property should give the landlord an address to which the security deposit should be sent.
- Is a landlord required to give the tenant the interest earned on the security deposit?
No. Georgia law does not require the landlord to place the security deposit in an interest bearing account nor does the law require that any interest that is earned be paid to the tenant. However, the tenant and landlord may agree that the landlord will provide interest earned on the security deposit and, if agreed upon, this should be reflected in the lease.
- What is the landlord required to do with the security deposit?
A landlord who owns more than ten (10) rental units, including units owned by their spouse and children, or who employ a management agent, regardless of the number of units owned, must give the tenant written notice of the location and number of the account in which the security deposit is held. As a substitute for having an escrow account, the landlord may post a $50,000 bond with the superior court clerk of the county in which the rental property is located.
- What happens to the security deposit when an apartment complex changes owners?
The former owner is responsible for making appropriate arrangements for the security deposit. The security deposit may be transferred to the new owner, making the new owner responsible, or the prior owner may refund the security deposit to the tenant. If the former owner fails to take either of these actions, the tenant has a legal action against the prior owner. A tenant should write to the former owner and the current owner requesting information on the security deposit.
- What other types of deposits may be required by the landlord?
In addition to the security deposit, the landlord may require an application fee, cleaning fee, pet deposit and an advance rent deposit. Before paying any of these deposits or fees a tenant should get in writing what the payment is for and under what terms the payment will be refunded. Refundable pet deposits and advance rent deposits are considered a security deposit under the Georgia law.
Application fees or deposits to hold an apartment until you actually sign a lease are not considered security deposits under Georgia law and are usually not refundable, should you choose not to move into the unit. You should ask if the holding deposit or application fee will be applied to your first months rent or security deposit if you sign a lease and move in.
Always get a receipt for any deposit or fee that you pay. If the fee is refundable, ask the landlord to put this information on the receipt.
- If an individual pays a security deposit on an apartment and the application is rejected, how long does the person receiving the security deposit have to return the funds?
If the amount paid was for a security deposit, Georgia law requires it to be returned thirty (30) days from the date the tenant vacates. Thus, the landlord may have a duty to return the security deposit within thirty (30) days after an application is rejected.
If the amount paid was a holding deposit or fee, it would be refundable under the terms which the tenant and landlord discussed at the time of payment. The Georgia landlord tenant law does not directly address reimbursement of such deposits. It is possible that the holding deposit would not be refundable. The answer would depend on the agreement between you and the landlord at the time of payment.
Always get a receipt for any deposit or fee that you pay. If the fee is refundable, ask the landlord to put this information on the receipt.
- My former landlord sent me a letter saying that I owed $500. I wrote the landlord stating that I disagreed with this statement. The landlord has now turned the matter over to a collection agency. What do I do?
If the landlord has turned the debt over to a collection agency you can write to the landlord disputing the debt and write to the credit bureau disputing the debt, informing them that the information given them by the landlord is incorrect. It may be helpful to send the credit agency a copy of any inspection lists or other letters that you wrote to your landlord concerning this debt.
Under the Fair Credit Reporting Act, a person may have incorrect or incomplete information corrected without charge. If a tenant disputes information in their credit report, the credit bureau must reinvestigate it within a reasonable period of time unless it believes that the dispute is irrelevant or frivolous. If after reinvestigation a disputed item is found to be inaccurate or can no longer be verified, the credit bureau must delete it. If the reinvestigation does not resolve the dispute the tenant may file a statement of up to one hundred (100) words with the credit bureau. This statement becomes part of the credit report unless the credit bureau has reasonable grounds to believe it is frivolous or irrelevant.
- Applicable Georgia Code Sections
§§ 44-7-30. Definitions
As used in this article, the term:
(1) "Residential rental agreement" means a contract, lease, or license agreement for the rental or use of real property as a dwelling place.
(2) "Security deposit" means money or any other form of security given after July 1, 1976, by a tenant to a landlord which shall be held by the landlord on behalf of a tenant by virtue of a residential rental agreement and shall include, but not be limited to, damage deposits, advance rent deposits, and pet deposits. The term "security deposit" does not include earnest money or pet fees which are not to be returned to the tenant under the terms of the residential rental agreement.
§§ 44-7-31. Placement of security deposit in trust in escrow account; notice to tenant of account location and number
Except as provided in Code Section 44-7-32, whenever a security deposit is held by a landlord or his agent on behalf of a tenant, such security deposit shall be deposited in an escrow account established only for that purpose in any bank or lending institution subject to regulation by this state or any agency of the United States government. The security deposit shall be held in trust for the tenant by the landlord or his agent except as provided in Code Section 44-7-34. Tenants shall be informed in writing of the location and account number of the escrow account required by this Code section.
§§ 44-7-32. Surety bond in lieu of escrow account; withdrawal of surety; fees; liability of clerk of superior court
(a) As an alternative to the requirement that security deposits be placed in escrow as provided in Code Section 44-7-31, the landlord may post and maintain an effective surety bond with the clerk of the superior court in the county in which the dwelling unit is located. The amount of the bond shall be the total amount of the security deposits which the landlord holds on behalf of the tenants or $50,000.00, whichever is less. The bond shall be executed by the landlord as principal and a surety company authorized and licensed to do business in this state as surety. The bond shall be conditioned upon the faithful compliance of the landlord with Code Section 44-7-34 and the return of the security deposits in the event of the bankruptcy of the landlord or foreclosure of the premises and shall run to the benefit of any tenant injured by the landlord's violation of Code Section 44-7-34.
(b) The surety may withdraw from the bond by giving 30 days' written notice by registered or certified mail or statutory overnight delivery to the clerk of the superior court in the county in which the principal's dwelling unit is located, provided that such withdrawal shall not release the surety from any liability existing under the bond at the time of the effective date of the withdrawal.
(c) The clerk of the superior court shall receive a fee of $5.00 for filing and recording the surety bond and shall also receive a fee of $5.00 for canceling the surety bond. The clerk of the superior court shall not be held personally liable should the surety bond prove to be invalid.
§§ 44-7-33. Lists of existing defects and of damages during tenancy; right of tenant to inspect and dissent; action to recover security deposit
(a) Prior to tendering a security deposit, the tenant shall be presented with a comprehensive list of any existing damage to the premises, which list shall be for the tenant's permanent retention. The tenant shall have the right to inspect the premises to ascertain the accuracy of the list prior to taking occupancy. The landlord and the tenant shall sign the list and this shall be conclusive evidence of the accuracy of the list but shall not be conclusive as to latent defects. If the tenant refuses to sign the list, the tenant shall state specifically in writing the items on the list to which he dissents and shall sign such statement of dissent.
(b) Within three business days after the date of the termination of occupancy, the landlord or his agent shall inspect the premises and compile a comprehensive list of any damage done to the premises which is the basis for any charge against the security deposit and the estimated dollar value of such damage. The tenant shall have the right to inspect the premises within five business days after the termination of the occupancy in order to ascertain the accuracy of the list. The landlord and the tenant shall sign the list, and this shall be conclusive evidence of the accuracy of the list. If the tenant refuses to sign the list, he shall state specifically in writing the items on the list to which he dissents and shall sign such statement of dissent. If the tenant terminates occupancy without notifying the landlord, the landlord may make a final inspection within a reasonable time after discovering the termination of occupancy.
(c) A tenant who disputes the accuracy of the final damage list given pursuant to subsection (b) of this Code section may bring an action in any court of competent jurisdiction in this state to recover the portion of the security deposit which the tenant believes to be wrongfully withheld for damages to the premises. The tenant's claims shall be limited to those items to which the tenant specifically dissented in accordance with this Code section. If the tenant fails to sign a list or to dissent specifically in accordance with this Code section, the tenant shall not be entitled to recover the security deposit or any other damages under Code Section 44-7-35, provided that the lists required under this Code section contain written notice of the tenant's duty to sign or to dissent to the list.
§§ 44-7-34. Return of security deposit; grounds for retention of part; delivery of statement and sum due to tenant; unclaimed deposit; court determination of disposition of deposit
(a) Except as otherwise provided in this article, within one month after the termination of the residential lease or the surrender and acceptance of the premises, whichever occurs last, a landlord shall return to the tenant the full security deposit which was deposited with the landlord by the tenant. No security deposit shall be retained to cover ordinary wear and tear which occurred as a result of the use of the premises for the purposes for which the premises were intended, provided that there was no negligence, carelessness, accident, or abuse of the premises by the tenant or members of his household or their invitees or guests. In the event that actual cause exists for retaining any portion of the security deposit, the landlord shall provide the tenant with a written statement listing the exact reasons for the retention thereof. If the reason for retention is based on damages to the premises, such damages shall be listed as provided in Code Section 44-7-33. When the statement is delivered, it shall be accompanied by a payment of the difference between any sum deposited and the amount retained. The landlord shall be deemed to have complied with this Code section by mailing the statement and any payment required to the last known address of the tenant via first class mail. If the letter containing the payment is returned to the landlord undelivered and if the landlord is unable to locate the tenant after reasonable effort, the payment shall become the property of the landlord 90 days after the date the payment was mailed. Nothing in this Code section shall preclude the landlord from retaining the security deposit for nonpayment of rent or of fees for late payment, for abandonment of the premises, for nonpayment of utility charges, for repair work or cleaning contracted for by the tenant with third parties, for unpaid pet fees, or for actual damages caused by the tenant's breach, provided the landlord attempts to mitigate the actual damages.
(b) In any court action in which there is a determination that neither the landlord nor the tenant is entitled to all or a portion of a security deposit under this article, the judge or the jury, as the case may be, shall determine what would be an equitable disposition of the security deposit; and the judge shall order the security deposit paid in accordance with such disposition.
§§ 44-7-35. Remedies for landlord's noncompliance with article
(a) A landlord shall not be entitled to retain any portion of a security deposit if the security deposit was not deposited in an escrow account in accordance with Code Section 44-7-31 or a surety bond was not posted in accordance with Code Section 44-7-32 and if the initial and final damage lists required by Code Section 44-7-33 are not made and provided to the tenant.
(b) The failure of a landlord to provide each of the written statements within the time periods specified in Code Sections 44-7-33 and 44-7-34 shall work a forfeiture of all his rights to withhold any portion of the security deposit or to bring an action against the tenant for damages to the premises.
(c) Any landlord who fails to return any part of a security deposit which is required to be returned to a tenant pursuant to this article shall be liable to the tenant in the amount of three times the sum improperly withheld plus reasonable attorney's fees; provided, however, that the landlord shall be liable only for the sum erroneously withheld if the landlord shows by the preponderance of the evidence that the withholding was not intentional and resulted from a bona fide error which occurred in spite of the existence of procedures reasonably designed to avoid such errors.
§§ 44-7-36. Certain rental units exempt from article
Code Sections 44-7-31, 44-7-32, 44-7-33, and 44-7-35 shall not apply to rental units which are owned by a natural person if such natural person, his or her spouse, and his or her minor children collectively own ten or fewer rental units; provided, however, that this exemption does not apply to units for which management, including rent collection, is performed by third persons, natural or otherwise, for a fee.
Georgia Legal Services Program
Last Revised: December 2003