Security Deposit 101
Our Free App & Guide for DC Landlords
We say it here often. If you’re going to lease your property in DC, you need to know the city’s tenant and landlord laws like the back of your hand.
Nowhere is that truer than with security deposits.
The question we most often get from DC landlords who went at it alone before signing up with Homebox is whether they’d handled tenant deposits correctly.
Thanks to the city’s labyrinth of rules and regulations, more often than not we find owners were miss something — despite their best intentions.
Why is good security deposit accounting important?
In tenant-friendly DC, even minor mistakes landlords make can come back to bite you if you have a tenant dispute or need to make a security deposit deduction down the road.
With that in mind, we put together a brief guide to demystify DC security deposits for landlords going at it alone. To go along with our guide, we also built a handy Security Deposit Tracker to help you calculate accrued interest due to tenants as required by DC law. Click that link to download it free for your properties.
Without further ado, here are our tips for managing security deposits in DC:
Security Deposit Guide for DC Landlords
Keep deposits in an interest-bearing account, separate from other funds.
You have 30 days from receiving tenants’ deposits to place them in an interest-bearing account. That account can’t be commingled with other funds, like rent collections or your day-to-day operating funds. We recommend creating (at least) three separate accounts for security deposits, rent collections, and operating funds. Some banks even let you subdivide your accounts, which comes in handy for tracking separate security deposits and interest on those deposits (see below).
Track interest accrued on tenant deposits each month.
Upon their departure, DC requires landlords to pay interest to any tenant whose deposit was held for at least 12 months. To do this correctly, each month you’ll need to keep track of your bank’s prevailing interest rate (you can find it on your statement under “annual percentage yield”) and do a little calculating. This gets a bit tricky over time, especially if you’re dealing with multiple deposits in one account. That’s why we built our tracker to make it easy for you.
Process deposits (and deductions) immediately after a tenant departs.
DC landlords have three days from when a lease ends to inspect properties for damages, 30 days to deliver an itemized list of deductions to tenants, 45 days total from when a tenant departs to return their deposit, net of claims and with accrued interest (see our tracker for help calculating accrued interest). Deductions can’t be for just normal wear and tear (e.g. no charging for small scuffs) and must be clearly tied to the tenant being at fault, whether due to negligence, abuse, or accident.
Provide the required deposit information to tenants at the end of each calendar year
DC requires landlords to inform tenants where their deposits are being held, and what the prevailing interest rate is used to accrue interest for each 6-month period over the last calendar year has been. We recommend sending it tenants the first week of January for the preceding year.
It’s a lot to keep track of. Hopefully our guide and tracker make it easier.
And if you ever decide to turn it over to professionals, we’re here to provide you a better experience. Click below to learn about how we’re reimagining property management below.
Why we started Homebox.
Let’s be honest. Property managers have a bad reputation.
They’re unresponsive. They saddle homeowners with hidden fees and mark-ups. They treat tenants as a means for collecting fees, which leads to higher turnover for their homeowners, and ultimately lower ROI.
We’re changing that.
We’re reimagined what the experience should look like for owners and tenants. For half the cost of traditional PMs, we provide the best property management experience, period.
For just 8% of rent collected, you get all this:
24/7 tenant and maintenance care
28-day rapid-rent guarantee
Quarterly property inspections
Utilities management
Security deposit management
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Financial reporting
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New tenant placement for 50% of one month’s rent
Wha you don’t get are renewal fees, vacancy fees, maintenance reserves, invoice mark-ups, or locked-in contracts.
We started this company because we’re as dedicated to the places we call home as we’re passionate about helping people find their way there. We’re bringing property management into the 21st century, and we’re putting people first doing it.
