Using Security Deposits For Rent

Can Tenants Use Security Deposits For Last Month’s Rent?

It seems like every month I find a landlord asking if a tenant’s could use their security deposit for rent rather than paying the last month’s rent. Every time I see this I get get disappointed…

The answer to this is not exactly straight forward and it depends on the particular situation, the reason the tenant is leaving and how bad the landlord wants the tenant out.

This of course differs from the legal answer which is no.

Under the Residential Tenancies Act, security deposits are not rent. They are specifically intended to cover potential damages and are to act as a security against that happening.

There are actually very specific rules about how landlords are to deal with security deposits which includes how they are held, how they are received and how the return of them has to be documented which includes any deductions.

If that’s the case, then why isn’t the answer straight forward?

Time & Circumstance

Dealing with security deposits isn’t straight forward as sometimes it’s simply easier to ignore the rules and let the tenants use the security deposit for rent.

This would be times such as the following,

• tenants have no money
• you want the tenants gone with no drama
• you trust them
• or it benefits both of you

Obviously if they have no money, they won’t be able to pay rent anyway.

If you want to avoid drama, why would you confront them about rent?

If you really trust them this might make the process easier.

And if it benefits both of you then it simply makes sense.

When Using Security Deposits for Rent Doesn’t Make Sense

On the other end of the spectrum there are situations where allowing the tenant to use the security deposit doesn’t make sense.

These include situations where,

• the tenants are breaching the lease
• the tenants have made your job tough
• you are expecting the tenants to leave a mess
• or there will be damages you have to pay for out of pocket

If the tenants are breaching the lease, you may be able to retain or use a portion of the security deposit to pay your advertising costs to re-rent the property or to cover lost rent.

If the tenants have been a real problem, there is always the payback of making it difficult for them (not always recommended).

If the tenants will leave a mess behind you will be out of pocket cleaning everything up, that is what the security deposit or damage deposit is meant to cover.

Much like a mess, if there are damages, the security deposit is intended to cover repairs that the tenant may be responsible for.

What To Do If The Tenant Uses Their Security Deposit For Rent

As explained earlier, you either allow it, or you don’t.

If you aren’t going to allow it, your first step is explaining to the tenant why they need to pay their rent and what the security deposit is intended for.

If that doesn’t get you anywhere, the next step is to inform the tenant that if they do not pay rent, you will move forward with an eviction. This involves filing at the RTDRS (Residential Tenancy Dispute Resolution Service) or the courts (do not use an eviction notice!!!!)

It also could involve extra expenses for them as they will be responsible for the filing costs along with potential additional costs. ($75 for RTDRS and $100 for the courts).

Additionally if you receive a judgment for the rent and the filing costs, the judgment appears on their credit rating. this can affect their credit rating, their ability to rent in the future (smart landlords do credit checks on their tenants and this would be a definite red flag) and generally reflect bad on them.

Granted, just because you have a judgment it is not a guarantee you will ever get paid. you may simply be throwing good money after bad, especially if they have no money.

But The Tenants Will Have Vacated By The Hearing Date

Currently the RTDRS is backlogged by as much as four weeks, this may get reduced over time, but it may also increase if the economy doesn’t improve drastically.

The concern for landlords is the tenants will be gone by the time the hearing date comes up.

That’s why it’s important to take action nearly immediately if the tenants have informed you to use the security deposit for rent.

If you file within a few days of determining they will not be paying and will be forcing you to use the security deposit for rent you achieve two important points.

First, you’re in the queue. If you wait until the end of the month you put yourself at the back of the line creating more opportunity for you to potentially lose or to simply settle for your tenants terms.

Second, you are able to serve the tenant. If you delay, the tenant may not provide a forwarding address that you can track them down at and you need to be able to prove you served the tenant or made attempts to serve them.

When they are living in your rental property you know exactly where to find them.

So even though they may have vacated by the time the hearing date arrives, they are obligated to appear if you served them properly.

What If They Don’t Attend The Hearing?

If they don’t attend the hearing you should be overjoyed. At least if you’ve followed the rules and process I lay out in my tenant eviction guide.

It’s very rare, if you understand the process, for a landlord to lose an eviction application if the tenant fails to appear. Especially in a case of the tenant attempting to use their security deposit as rent.

By this point you should have all the proof and verification that rent was not paid and depending on how long after the tenant has vacated you may have additional evidence that could be appended to the application showing additional costs you incurred.

This may require a separate hearing to file for these additional costs, but will your first application liking being a success it paves the way for an application for additional damages to also succeed.

Bottom Line, Security Deposits Are Not Rent!