What to do if the Security Deposit Doesn’t Cover Unpaid Rent

what if deposit doesnt cover rent

Asking for a security deposit before a resident moves in is essential to your financial security as a landlord. This deposit acts as a way to encourage your resident to pay their rent on time and follow the rules of the lease agreement so that they can get this deposit back. 

That being said, this doesn’t guarantee that they will follow the rules. You may still face unexpected expenses due to property damage or unpaid rent if the security deposit is not enough to cover their entire cost. 

If you run into this issue, you’ll need to have a thorough knowledge of the Idaho rental laws so that you can navigate the situation without running into any legal trouble. Learn the best practices you can follow as a landlord if you end up in a situation where the security deposit isn’t enough to cover unpaid rent. 

When can you deduct money from your resident’s deposit?

Under Idaho law, you can deduct the entire amount or part of a resident’s security deposit for two reasons: property damage or unpaid rent. Your resident cannot use the deposit to cover their last month’s rent payment. It will only cover any losses you face as the landlord. 

What do you need to do prior to deducting from a resident’s deposit? 

Before deducting any amount from your resident’s security deposit, you should serve them with a three-day notice if they are late with their rent payment. They have two options: either pay the full rent amount or vacate the rental property.

using security deposit for unpaid rent

If the resident has been living in the rental for less than 45 days, you should serve them a four-day notice instead. Weekly residents are subject to the same four-day notice period.

No state-wide grace period exists for payment of due rent. You may include a grace period clause in your lease agreement if you wish. If you do not, you can serve the notice on the first day your resident is late with their rent payment.

You are required by law to accept rent payment from a resident if it’s made after you have served them with a notice. Your resident may have to pay for attorney or collection fees that were incurred in the process of taking legal action.

What do I do after sending a notice?

After sending a notice to your resident, you’ll need to wait for the given time period to end. If they have not paid their rent by then, you can begin the next steps of the process. First, you’ll need to determine how much money they need to pay you and why so that you can defend your demands in court if you need to. 

After sending your first notice, you can send your resident with a second notice. Attach the first notice to the second. The second notice should mention that you will take legal action if the situation cannot come to a resolution beforehand. 

can i use security deposit for unpaid rent idaho

If the resident still refuses to pay rent, you may decide to take them to court. This should not be an emotional decision. You need to understand all the details of the situation and make your decision based on these. Consider the associated fees and time investment behind the legal procedures and determine if it’s worth it. 

You should consider that your resident may have insufficient funds to make their rent payment. In this case, even if you win a judgment in a small claims court, you can’t collect the money immediately if your resident doesn’t have it. 

Always consult with a legal expert before taking any legal actions by yourself. Making any mistakes from a strictly legal point of view may lead to a lost court case or a countersuit with your resident.

How do I prevent running into this situation?

Resident screening is a crucial procedure for removing unfit applicants from your pool of prospective residents. Conducting efficient and thorough screening means that you can significantly cut your risk of having to deal with unpaid rent.

  • Conduct a background check on all prospective residents. 

Find a company that offers comprehensive background checks. You just need the prospective resident’s SSN for this purpose. The check should cover the applicant’s credit history, prior evictions, failed rent payments, criminal records, and even unpaid child support.

  • Interview each prospective resident. 

No amount of online research will substitute a face to face conversation with the prospective resident.

can i use security deposit idaho

Even just a short interview to discuss who they are and what they want out of a rental can make a huge impact on your long-term relationship with them. Keep in mind that you still need to respect the 7 protected classes with the Fair Housing Act.

  • Verify each prospective resident’s employment status. 

You should always check if your applicants have a long-term work contract or steady source of employment. Additionally, you could contact their previous employers to learn how responsible and reliable they are. 

What other security deposit rules exist in Idaho? 

In Idaho, there are no limits placed on landlords with regard to how much they can set the security deposit amount to. However, you may face an increased vacancy rate if your property has a deposit that is significantly higher than the area’s average.

You need to return the security deposit to your resident within 21 days after they move out. Upon reaching an agreement with your resident, you can reduce or extend this period of time. Under no circumstances can you change the timeline by yourself without consulting your resident beforehand. 

If your resident agrees to a security deposit return extension in their lease agreement, it may not exceed 30 days. When you pass this 30-day period, you’ll effectively breach the legal regulations.

You need to fully refund the security deposit if:

what if the deposit doesn’t cover unpaid rent idaho

Conclusion

A security deposit is an important financial instrument. As a landlord, you can require a deposit to protect against the risk of losing money. In Idaho, you can deduct from your resident’s deposit to cover for the cost of property damage and unpaid rent.

Should the deposit fail to cover the amount of unpaid rent, you can send your resident to collections in order to report the balance due to their credit. This helps notify future landlords as well as encourage them to pay the balance before making any large, future purchases.

Make sure to follow the legal requirements regarding deposits so that you don’t run into any legal issues. Consult a legal expert or a professional property management company, like Five Star Property Management, to help you navigate this tricky situation. 

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