One particular challenge to consider before taking the plunge to live with a roommate is the security deposit and how you’ll both pay it.
Luckily, you aren’t the first person to be in this situation. Check out our helpful advice for overcoming the challenge of splitting the security deposit.
What is a security deposit?
Before we talk about how to split the roommate security deposit, let’s quickly discuss what is a security deposit and why it’s important. A security deposit is a refundable payment to the landlord that guarantees the renter will follow the terms of the lease and keep the rental property in good condition.
When the lease is up, a renter can get back the entire security deposit if the apartment is in the same condition it was upon rental. If there’s damage to the apartment, the landlord will use some or all of the security deposit to cover the cost of repairs.
Security deposits are important to both the landlord and the renter. Landlords care about security deposits because it ensures that their property will stay in good condition, and they’ll already have money from the tenant if they need to fix things.
Security deposits are a motivation for renters to keep the place in good, working condition and uphold the lease because if they do, they’ll get money back at the end of the lease.
How much is a security deposit?
The cost of a security deposit can vary but generally equals the amount of one month’s rent. However, it can be as much as three month’s worth of rent. In most states, there’s a legal cap on how much landlords can charge for a security deposit. Before you rent an apartment, you’ll want to factor in the cost of the security deposit when you’re creating your budget.
How to handle the security deposit with roommates
Once you’ve found a roommate (or multiple roommates) and a place to rent and are ready to sign the paperwork, you’ll want to work out how to handle the upfront costs. These typically include first and last months’ rent and a security deposit. Here are some suggestions and steps to take on how to handle the roommate security deposit.
1. Understand your roommates’ long-term living intentions
When moving into a new apartment, anyone over 18-years old will likely be required to sign the lease agreement to establish a residency in the apartment. The lease will almost certainly state that all roommates are jointly and severally liable, a legal term that means all roommates are responsible for maintaining the terms of the lease agreement.
If one roommate fails to pay rent, the whole unit is liable. The same principle applies to the security deposit agreement between roommates. If one of the occupants decides to move out early and request back their portion of the security deposit, you can bet it won’t be coming from the landlord. They’ll likely not refund any portion of the deposit with tenants still occupying the apartment. You’ll have to fork it over or the roommate will have to wait until everyone moves.
Because of this, you need to have a conversation prior to renting that outlines each roommate’s long-term intentions. If you both plan on staying the entire length of the lease, then splitting the security deposit equally is a good way to go. However, if one of you knows you’ll be leaving early, then one roommate could pay the security deposit and the other roommate could take on expenses elsewhere.
2. Write it down
Once you understand and agree upon the living arrangements, you need to draft a written agreement concerning the terms of co-residency.
These agreements, often called roommate rental agreements, can include almost any topic that would need to be clarified in writing, including how to handle security deposits, how long each roommate plans to live there, how to split bills, etc. There are even a ton of sample agreements that you can use as a starting point and customize to fit your needs.
Having a written agreement is binding and outlines everything to which you agreed. Verbal conversations can be misconstrued and aren’t binding like a written document. These types of documents can save you stress in the future.
3. Track your spending
Now that you understand the living arrangements and have a written record of your financial arrangements, it’s time to create a document and track all of your shared expenses and spending record. Create an Excel sheet or a Google Doc where you and your roommate can keep a tally of expenses, who paid for what, when the payment was made, etc.
You could also use financial tracking apps like Venmo or PayPal. Here, you’ll have a digital record of payments and can reference them in the future. This will come in handy when it’s time to get the security deposit back.
Communicate financial expectations clearly
Whether you split it 50/50 or choose to have one person pay the security deposit and the other pay last month’s rent, it’s up to you and your roommate to decide how to handle the finances.
But it’s essential to understand the terms of your financial agreement, including the roommate security deposit, before you sign the lease. Otherwise, things could get messy.
