A security deposit is a sum of money paid to a landlord or property manager at the start of a lease. It serves as a form of insurance against potential financial losses the landlord might incur due to a tenant’s breach of the lease agreement, such as unpaid rent or property damage beyond normal wear and tear. For example, if a tenant causes significant damage to a property or leaves owing back rent, the landlord can use the security deposit to cover the costs of repairs or lost income.
This upfront payment provides landlords with a financial safety net while offering tenants a chance to demonstrate their commitment to responsible tenancy. Historically, security deposits have played a vital role in the landlord-tenant relationship, fostering trust and accountability on both sides. Their existence allows landlords to mitigate risk, encouraging them to offer their properties for rent, while simultaneously incentivizing tenants to maintain the property and fulfill their lease obligations. This practice contributes to a more stable and predictable rental market.
