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Should I Hold a Deposit for Prospective Tenant?

Before we run you through the fact as to whether you should ask for a deposit from a prospective tenant, we will first go through as to how the entire tenancy process goes till you ask the prospective tenant for the first deposit.

Having your first tenant move in can be a tiring job. There are different things to consider, and it all starts right from when the tenant has first contacted you. It is important that you first schedule a meeting to meet the tenant and show the apartment to be rented out. During the meeting, check out the basic behaviour of the tenant. Also, do a proper credit and background check of the tenant before moving in.

Tenant’s Employer and previous Landlord

Before accepting the person as your tenant, contact tenant’s employer to check his salary history and whether he has a reliable income source or not. Even contacting tenant’s former Landlord is important to make sure that the tenant has cleared all the debt and have not created any damage to the property. Even social behaviour and activities could be confirmed from the previous landlord of the tenant.

Signing the Lease and Holding a Deposit

This is the final step but here make sure that the tenant has clearly understood all your conditions and there is no ambiguity left between both Landlord and tenant. Signing the lease is what will make the deal complete, and this is where the prospective tenant might want to give you a check before they sign the lease. So, should you accept the check or ask for a deposit?

It is important that you hold on to the deposit. You can request the money to ‘hold’ on to the tenant’s right to move in. This will ensure two things. One, that the tenant actually has interest to move in to the home. And two, that you as the landlord will have a tenant more intent on signing the lease.

You might look at a number of people who state that landlords should not hold on to the deposit till signing of the lease. However, the problems in that approach can be many. Accepting a check from the tenant can mean that the tenant can always get back their money. However, if they have deposited money to hold on to their place, they would be more intent on moving in and not look for other places in the meanwhile till the signing of the lease.

Should You Hold a Deposit for a Prospective Tenant?

If you have finally zeroed in on a tenant, you would like to have, and he is offering you a check – refuse. It is a good idea to tell your tenant to pay you directly or send the money to your bank account. This is because tenants can send a check to you and then refuse to move in, as he might still be searching for a place elsewhere.

It is a good idea then to draft a contract with the tenant and have him sign it, so that you know that you would be earning the rent income as soon as possible, and without having to worry about the tenant not turning up for the stay. Signing the lease is important as it helps make a formal acknowledgement by both the parties and you do not have to worry about you forfeiting the money, in case the tenant fails to turn up.

The question that many tenants have when depositing money with you is what if you give the room to someone else when you’ve taken money from them, as all this would be done before signing of the lease. A good way to get around the problem is to have a formal acknowledgement that the tenant paid you money that you would hold on as deposit. However, it is a good idea to let the tenant know that the money as a deposit would not be refunded in case the tenant decides to move in elsewhere.

Having a deposit will also help you separate the wheat from the chaff, enabling you to locate tenants who are genuinely interested in grabbing up the opportunity. Do not have a check to hold by the prospective tenant before they sign the lease. Go in for a deposit always, and ensure that the tenant signs on the lease as soon as he can.