Are you in the market for a rental and a landlord is asking for a huge amount upfront?
I have been a landlord for many years and have seen other landlords ask for very aggressive payments even before the tenant steps into the unit.
Usually this takes the form of the first and last month’s rent as well as a healthy security deposit, which is usually equal to a full month’s rent (or in some cases, more).
That’s equal to three months rent upfront! It can create huge sticker shock for the prospective tenant and they may question whether something like this is even allowed.
In this article, I am going to answer that question.
I will include a discussion of laws that may apply as well as other considerations that a landlord should weigh when asking for this type of upfront payment.
I will also cover why a landlord may ask for this and some ways in which the landlord and tenant can work out a reasonable compromise.
If you have don’t have the time to read through it all, here’s a short answer to the question:
In most cases, a landlord is entitled to ask for at least a reasonable security deposit and the first month’s rent prior to move in. However, also asking for the last month’s rent or a larger than normal security deposit may run afoul of state and local laws that prohibit the receipt of excessive upfront rental payments or security deposits.
Ok – let’s get into it.
The information contained in this post is for informational purposes only. It is not legal advice. You should seek the advice of a qualified legal professional before making any decisions relating to the topics covered by this article.
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What Is the Real Definition of Rent and Security Deposit?
People often get confused between the rent and a security deposit.
The rent is the payment that a tenant makes for the right to live in the property.
The security deposit is a payment made by the tenant to the landlord to cover any damages or unpaid rent or other obligations at the end of the lease.
It is not a substitute for a rental payment and, although it is often confused with the last month’s rent, it serves an entirely different purpose and is subject to different rules.
The first month’s rent is simply the initial payment made by the tenant at the beginning of the lease to cover the first month of tenancy.
The last month’s rent is payment for the last month of the tenancy, but is sometimes requested at the beginning of the lease to cover a situation where the landlord may not be able to extract payment from the tenant for that last month of tenancy when the time comes.
You Need to Examine State and Local Landlord Tenant Laws to Determine Legality
As I mentioned earlier, state and local laws may have limitations on how much a landlord may charge a tenant upfront. They may also have limits on security deposits.
Most states will allow at least some upfront collection of rent and security deposit. But the devil is in the details.
For example, Virginia’s landlord tenant laws prohibit a landlord from receiving a security deposit that is in excess of two months rent.
They also permit prepaid rent in any amount, but any such prepaid rent must be placed into an escrow account and released only when that rent is due.
Of course, different states may have different rules around both of these types of payments, so you should check your applicable landlord-tenant laws and security deposit laws to find out what the rules are in your jurisdiction (or ask a lawyer to help you navigate through it all).
For your convenience, here’s our 50 state reference table (including D.C.) that will link you to the official landlord tenant laws of your state.
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Why Do Landlords Ask for First and Last Month’s Rent Plus a Security Deposit?
There are several reasons why landlords do this.
First, requesting first and last months’ rent provides landlords with extra peace of mind in case the tenant fails to pay rent during the last month of the lease. Now that last month of the lease could come sooner than anticipated, especially if the tenant stops paying. In that case, the landlord would begin eviction proceedings and that could take months. Having that extra month at the end already paid for can soften the financial blow if a tenant decides to stop making payments.
Additionally, if you have a security deposit equal to a month’s rent, that can also come into play in this scenario. If the eviction takes two months for example, that security deposit can serve as the rent for the second month.
Of course, a security deposit can also serve to protect landlords from damages caused by tenants. While most tenants take good care of their rental properties, there’s always a risk of accidental damage or negligence.
Downsides To Asking For this
However, there are some potential downsides to asking for first and last months’ rent as well as a security deposit.
For one, this can be a significant upfront cost for tenants, which may make it difficult for them to afford to rent the property in the first place. This can limit the pool of potential tenants and make it harder for landlords to find suitable renters.
Additionally, some tenants may feel as though they are being taken advantage of by having to pay so much money upfront. This can lead to a strained relationship between the tenant and the landlord, which can make it difficult to resolve any issues that may arise during the lease.
In some cases, landlords may also be accused of unfairly keeping the security deposit at the end of the lease, which can lead to legal disputes and a damaged reputation.
This is why it’s important for landlords to be clear about their expectations and guidelines when it comes to security deposits.
Possible Compromises Between Landlords and Tenants On this Issue
If you’re a landlord considering asking for first and last months’ rent as well as a security deposit, there are several steps you can take to ensure that you’re following the proper guidelines and maintaining a positive relationship with your tenants.
As we’ve mentioned, make sure that you’re familiar with your state’s landlord-tenant laws and regulations. This will help you understand what you’re legally allowed to ask for and what you need to do to protect your property and your tenants.
You may also want to consider offering alternative payment options, such as allowing tenants to pay the last month’s rent in installments rather than all at once. This can help make it easier for tenants to afford the upfront costs of renting your property.
Finally, remember that building a positive relationship with your tenants is key to a successful rental experience.
Be responsive to their needs and concerns, provide clear communication and make sure that you’re meeting your obligations as a landlord. This can help ensure that your tenants feel respected and valued, which can lead to a smoother and more successful rental experience for everyone involved.
Closing Thoughts
So there you have it, a detailed look at whether a landlord can ask for first and last months rent (and security deposit) and some key considerations you should factor in when thinking about implementing this. Hope this has been helpful and happy landlording.