There are certain instances where you may need to consider increasing your security deposit to accommodate additional risks. However, many states have a ceiling that caps how much can be charged. So if the tenant has already paid the maximum allowed, then an increase cannot occur regardless of how the tenancy circumstances may have changed. The most common would be the addition of a pet or animal and even a new occupant. If the tenant wants to add an additional occupant to the lease, you normally have the right charge additional security.
The pet deposit is an obvious one – and many states even allow this to be a non-refundable fee like North Carolina. If that is the case, then any funds that are non-refundable may be kept in your operating account for the rental property or even your own personal bank account and used as you see fit. If non-refundable fees are not permitted like in Alaska, California and some other states, then the deposit can only be used to remedy damages directly related to the pet. Otherwise, the entire amount that was collected specifically for the pet must be returned.
Other reasons that often justify asking for additional security include the tenant’s request to have a waterbed, aquarium or other items that may pose a potential risk.
A word of caution: You cannot increase a tenant’s security deposit on a mere whim because they’ve been loud or because you got into an argument with them and disagreed with everything they said. You are also prohibited from increasing their security deposit as an act of discrimination against his or her civil rights or as a means of retaliating against them if they complain to you or authorities about their living conditions (including maintenance and repair issues).
Any increase you propose must be done justly and within reason without exceeding any maximum limits or nonrefundable clauses. By the way, don’t expect to get a favorable response from your tenant if you do decide to ask for additional security. So before you approach the issues, you may want to consider the impact your request may have on your landlord-tenant relationship and whether the increase is truly needed to offset a reasonable amount of risk. Not always, but sometimes when you give a little, you get a little too…and if you’re really lucky – a lot more. Great tenants are not always easy to find. So don’t take the uneventful tenancies for granted.
See a summary of the security deposit laws.