Security Deposit

Full Definition

A security deposit is a sum of money -- typically collected before or at the start of a tenancy -- that a landlord holds as insurance against the tenant's failure to pay rent or causing damage beyond ordinary wear and tear. The landlord is generally required to hold the deposit in trust (sometimes in a separate escrow account) and return it within a state-mandated deadline after the lease ends, minus any lawful deductions. Deposit amounts vary widely: many states cap them at one or two months' rent, while others impose no statutory limit. Regardless of the cap, the deposit legally remains the tenant's money throughout the tenancy. If the landlord fails to return the deposit or provide an itemized statement within the required timeframe, most states impose automatic penalties -- often double or triple the deposit amount.