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February 18, 2009
Second Security Deposit
I have been living in my current apartment for about 10 months and plan to renew my lease for another year. I received a letter from my landlord letting me know that my rent will increase by 4% and that I have to pay an additional $100 security deposit. This security deposit is in addition to the deposit I paid when I started my lease last year and I have not caused problems or damage which would require additional "insurance". This is the first time I have heard of anyone paying an additional security deposit to renew their lease - is this a common practice or can I negotiate to have this fee waived?
Comments
Yes, this is very common. The additional $100 deposit is to match your rent increase. The security deposit is usually equal to 1 month's rent. So if you rent increased, so does your security deposit.
Posted by: bk14 at February 18, 2009 12:34 PM
This is normal. If your rent increases by $100 your security will increase with it. You will get it back at the end of your stay. Same goes for last month rent - if rent increases the landlord will require a difference at new lease signing to cover last month rent.
Posted by: mg1 at February 18, 2009 12:37 PM
Normal.
Posted by: daveinbedstuy at February 18, 2009 12:39 PM
Thanks for your help everyone!
Posted by: jas1 at February 18, 2009 12:49 PM
I can say as a landlord that I have raised rent aplenty, but would never consider raising someone's security deposit, particularly for a good tenant. I think it's weird.
Either your landlord is weakly pushing at you (doubtful, a push is usually much more pushy) or just being a weirdo about money (not surprising given the current reality).
Honestly, this is not a great environment for raising the rent in the first place, much less the security deposit. If you are paying market-ish for last year, then I would try to negotiate. Pull comps in your neighborhood, make a decision based on what people are paying right now about what kind of increase is fair, and write a polite, professional letter that makes a reasonable, ideally win-win, offer.
I would also be careful. Asking for more security deposit could mean a million things. But if it's about your landlord feeling financially insecure, then you have to make sure not to negotiate in a way that arouses that fear. If you can be dispassionate, professional and polite, then I don't see the harm in representing yourself. It might be legitimately unreasonable to demand 4% more in a declining market--if you're a good tenant from your landlord's POV and if you are paying a 2006-7 market rate, say. But I would make sure not to get too tenacious or righteous about it.
Posted by: vanburenproud at February 18, 2009 12:49 PM
Hey I just posted and am so surprised to see other people posting that this is normal! I have been on both ends of this landlord-tenant relationship for many years now, and have never seen such a thing. My own rents as a tenant have risen more times than I can count and I have never been asked for more security deposit.
DIBS, others, why do this?
Posted by: vanburenproud at February 18, 2009 12:52 PM
I've never asked this either. otoh, I only raise tenant's rents every 3-4 years.
jas1: Incidentally, the landlord must pay iirc 4% interest on your deposit/last month's rent annually...does he discharge that responsibility or it only one way?
Posted by: cmu at February 18, 2009 1:28 PM
Owning and renting apt is business and should be conducted as such. Rent goes up so do the deposits. We are talking $100 not a $1000 here. What is a big deal since tenant gets it back anyhow if all is fine.
Posted by: mg1 at February 18, 2009 1:29 PM
When I lived in Bklyn I was never asked to give additional security deposit when my rent increased. I was mostly in apartments in a private homes (3-4 family) not large buildings.
When we moved over to Jersey City (large building) it was included in the wording of the lease that with the annual increases we'd have to pony up additional security deposit. I don't know if this factors into the equation at all but thought I'd mention it since you stated your increase as a percentage but, all buildings in JC with more than 4 units are rent stabilized. Does that change anything? I don't know.
Posted by: TownhouseLady at February 18, 2009 1:38 PM
CMU - where did you get 4% from. If this would be true I would love to know which banks give this type of interest.
FYI:
The following information is from the Attorney General's "Tenant's Rights Guide":
Landlords, regardless of the number of units in the building must treat the deposits as trust funds belonging to their tenants and they may not co-mingle deposits with their own money. Landlords of buildings with six or more apartments must put all security deposits in New York bank accounts earning interest at the prevailing rate. Each tenant must be informed in writing of the bank's name and address and the amount of the deposit. Landlords are entitled to annual administrative expenses of 1% of the deposit. All other interest earned on the deposits belong to the tenants. Tenants must be given the option of having this interest paid to them annually, applied to rent, or paid at the end of the lease term. If the building has fewer than six apartments, a landlord who voluntarily places the security deposits in an interest bearing account must also follow these rules.
For example: A tenant pays a security deposit of $400.00. The landlord places the deposit in an interest bearing account paying 2.5%. At the end of the year the account will have earned interest of $10.00. The tenant is entitled to $6.00 and the land lord may retain $4.00, 1% of the deposit, as an administrative fee.
Posted by: mg1 at February 18, 2009 1:42 PM
I agree that it's normal, though clearly it's not required and not always done by smaller landlords. For rent regulated apartments, there's a lease rider that specifies these increases and accompanying notices. CMU, I know you fancy yourself a defender of tenants, but also noticed you recently covered yourself with "only joking" after railing against a landlord's responsibility concerning the lead law, or whether you'd rent to a family or not. Since you're asking whether other landlords meet their obligation re: interest, please let us know whether *you*
co-mingle funds and/or pay interest, too.
Posted by: vinca at February 18, 2009 1:56 PM
I have rented many apaprtments and no one ever increased my security deposit!
Posted by: karo25 at February 18, 2009 2:21 PM
The security deposit should match your monthly rental payment.
Posted by: Ysabelle at February 18, 2009 2:42 PM
vinca, you (as many here) confuse letter of the law with intent. Whether or not I actually have a separate bank account (as required by the letter) or just pay my tenants the interest (intent) every year , which I do, only a lawyer could look askance at.
Same for the lead law...I know the apartment is clean (since it's been partially renovated and repainted twice) but I can't "prove" it per law.
Posted by: cmu at February 18, 2009 2:57 PM
Crazy, I have lived in a wide variety of rental situations (owner-occupied, large buildings, loft spaces with commercial leases, etc.) and have **never** been asked to pony up more security as the rents increased.
mg1, I am all about maintaining a businesslike relationship with tenants. But what's the business rationale for collecting this money? A security deposit is a Trust Substitute. The longer a tenant stays, the more the tenant is building an Actual Trust Relationship.
If the tenant can't establish trust after living there a year, then there's no real reason to keep renting, particularly in a small, owner-occupied situation. And if the tenant has developed an Actual Trust Relationship *and* the landlord has a security deposit, then what does asking for an extra $100 do except breach that trust relationship from the landlord's end?
The only reason I can see for doing it is because one can. Is there something here I don't understand?
Posted by: vanburenproud at February 18, 2009 3:12 PM
vanburenproud...I'm not saying I would do it, I wouldn't to a good tenant but I hear it's pretty normal. I agree, it's knda anal for these small amounts.
Posted by: daveinbedstuy at February 18, 2009 4:01 PM
Oh, and I am not accusing you of being a tight-ass, DIBS.
I'm legitimately curious.
Posted by: vanburenproud at February 18, 2009 4:02 PM
The more important question is, why are you agreeing to a rent increase in a quickly falling rental market?
Posted by: lechacal at February 18, 2009 4:12 PM
Over 12 years we have had few tenants and many of them for along time (longest 8 years). We have very good relationship with all of them (5 all together) and every time we have raised rents we also adjusted security deposits and last month rent - never had an issue with it. Simple accounting.
My tenants never questioned it. Do I trust them -sure I do, otherwise I would not renew their leases. Do they trust us - I guess they do, because every time there is a issue or problem they contact us promptly and we fix it in a day or two. This is not a big deal. You do not have to do it.
We have it included in our lease so they are not surprised by it. It is rather standard procedure specially in bigger buildings. Why make an issue out of such a small $ adjustment?
If my tenant would question it I would be worried- I think.
Posted by: mg1 at February 18, 2009 4:25 PM
Reality, lechacal, reality. Not all rents are falling just because you hope they will.
Posted by: daveinbedstuy at February 18, 2009 5:11 PM
Accounting? You do it because you can mathwise, even though there's no practical gain to speak of and it's a bit of a dick move in terms of the Trust Relationship the security deposit symbolically begins?
I still totally don't get it.
Posted by: vanburenproud at February 18, 2009 5:21 PM
DIBS, please.
Rents are, objectively, falling. Not falling like Hannible or Cornerbodega thinks they are. But it's certainly a renter's market right now.
Posted by: vanburenproud at February 18, 2009 5:28 PM
VBP: when I've seen this done for unregulated apartments, I've seen it applied as a strictly business, strictly bookkeeping practice, with no hidden messages or implied distrust. Applying it in tandem with lease renewals helps keep it neutral, as opposed to suddenly imposing it on a long-term tenant where the difference has grown and other circumstances (the tenant's, or the landlord's) have changed (at which point, it can easily fall into the category of dick move). Updating the deposit upon lease renewal is no different than replenishing funds when a portion of the security deposit has been applied to repairing damages. When I see such a strong reaction against even the idea of it, it reaffirms for me the utility of addressing the issue in a predictable and neutral fashion.
cmu, I wonder how you survive, carrying on your diligent fight of rationalism against the masses of dimwits? Nice try, but not confused between the letter of the law and intent, or between intent and performance or compliance. Not confused about the exemptions you cut for yourself, but don’t cut for others. Failing that, don’t forget—just kidding, of course.
Posted by: vinca at February 18, 2009 5:33 PM
Vinca,
I understand how it's applied--the OP's lease probably clearly states that this was going to happen. What I am saying is that I would (at this point in my life anyway) definitely walk away from a lease like that unless the housing market was tight and I felt like I was over a barrel.
I see how in writing this seems like total small potatoes, and I don't intend any disrespect to MG1, who I don't know. But this sort of thing just sets my spidey-sense off. The human angle of any business transaction is really important to me. I strongly prefer working with people who are working with a clear sense of what business practices mean socially. I find them to be better businesspeople. More flexible. More interested in finding win-win.
(the best landlord I ever had was a very tough negotiator who was *more than fair* to himself and hard as nails, but *always* with fairness and empathy and a clear sense that business is a game or a dance that both people should walk away from feeling like they won)
Maybe I am just forgetting all the times I said no to a lease like this. But I can say that I have pulled out of a job and a business deal because of totally different but similarly vaguely-exploitive-for-no-good-reason small-deal issues that seemed like nothing to get the hackles up over at the time. And both times I found out later that I made a good choice.
I am not in a position to argue with any one person who does this with their tenants--I don't know MG1, I don't know anything about him or her. All I am saying is that *in my own experience* I have found that people who do things that violate social contracts a little bit with something that sense mathmatically or is allowed or whatever are not always pleasant to work with in other ways.
Posted by: vanburenproud at February 18, 2009 6:35 PM
The security deposit and last month rent match the current rent and go up when rent is raised. Has nothing to do with trust - it's business. My tenants live here because they pay rent, not because I love them. If they weren't decent tenants, I would not renew them - life is too short to have unpleasant people living in the building that is my home.
It seems to be OK with people that big landlords take actions that people find objectionable from small landlords. I don't understand why anyone would expect a small landlord to take more risks with tenants than a big landlord does. I'm less able to absorb a problem tenant than a big building.
Posted by: jfss at February 18, 2009 6:46 PM
Trust is not the same as love, trust *is* part of business (see: credit crisis) and raising the security deposit by such a small sum doesn't create less risk for a landlord.
The size of the landlord's building doesn't matter, and FWIW, I am making my opinion here as someone who has been a landlord myself for years.
Posted by: vanburenproud at February 18, 2009 9:49 PM
If I'm following the logic, such as it is, the reason to raise the security deposit is to protect yourself, in other words, the tenant is likely to make a finely tuned decision to create $100 more damage since his rent has gone up by $100.
The only reason the deposit is one month's rent in the first place is because it's convenient and what the market expects, not on any objective assessment of risk.
vbp, I totally agree with your sentiments, a breath of fresh air here.
Posted by: cmu at February 19, 2009 10:44 AM
$100 isn't much, but that logic runs both ways. It's certainly not a deal-breaker to the tenant, even in this environment. As others have said, they will be getting the deposit back if they don't trash the place.
Posted by: corolla at February 19, 2009 12:45 PM
only on this blog could such a basic question lead to such BS in the comments. when you renew a lease that calls for a one-month sec deposit then most landlords will probably ask you to bring the balance in line. jeez this ain't rocket science.
Posted by: martis at February 20, 2009 4:15 PM
We've always had to up the security deposit when the rent went up. Totally normal. Not sure if I'd do it to my tenants now, will depend on what kind of tenants they are, but nothing to worry about.
Posted by: czar at February 20, 2009 9:36 PM
I've never heard of increasing the security deposit with the rent either. It sounds like it's some old-school kind of thing, where it's anticipated that the renter would be in the apt for 20 years and you wouldn't want the deposit to be so dimished by inflation that it would become toothless. At the rate of $100, it does seem petty.
Posted by: mopar at February 20, 2009 11:23 PM
I've had some landlords do it, and some not. Most do it.
Posted by: Heather at February 23, 2009 10:30 AM
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