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Importance of a Security Deposit

Alaska allows the collection of a security deposit when a tenant moves in and hold it until the tenant leave. The general purpose of a security deposit is to assure that a tenant pays rent when due and keeps the rental unit in good condition. Rent you collect in advance for the first month is not considered part of the security deposit.

Normally, the best advice is to charge as much as the market will bear and within the legal limits. Alaska does have a limit that no more than two months of rent can be collected, unless if you fall under the exception rules.  The point is, the more the tenant has at stake, the better the chance the property will be respected. The larger the deposit means the more financial protection for a landlord if a tenant leaves owing a balance.  The deposit should be paid in full and not in payments because non-paid deposits doesn’t warrant an eviction.

The deposit amount must be balanced with the cost of vacancy. If the deposit is too high, the pool of prospects can be greatly reduced thus increase the number of vacant days. Therefore, some properties might have 1 month as a deposit and others might be only half a month as a deposit. The cost of vacancy must be compared to the risk/reward of a deposit.

The state law also regulates where you hold the deposit and when you return the deposit.  It is required to keep the deposit separate from personal funds by using a trust account.  When a tenant moves out, the landlords has a set number of days to process a security deposit transmittal. If there are no damages and all the rules are followed, then it is refunded on or before 14 days. Should there be damages, the landlord can take up to 30 days because it takes time to complete repairs and obtain invoices. There are hefty, but fair, violations when the deadlines are missed.

The Alaska Landlord Tenant Act was updated in 2014, which changed a few things on what can be charged or not.  Example: Should professional carpet cleaning be completed prior to move in, with receipts, then it can be required of the tenant to do the same upon move out.  If the tenant does not comply, you could charge the deposit and provide a professional receipt. Other items that could potentially be charged to the deposit is unpaid rent, damages beyond “wear and tear”, cleaning, fees, legal expenses, and consumable items.  Due to the deadlines, it is on the landlord to prove that they made effort. Therefore, all security deposit transmittals should be tracked in the mail or a dated/signed receipt by all parties for when it is handed to the tenant. Having a strong lease is very much needed to avoid disputes because the Landlord-Tenant act doesn’t cover everything, just fundamental basics for how to conduct the transaction.

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