Kansas City is the fastest-growing Midwest metro because it's filled with job opportunities, affordable housing, and an incredible culture!
As a Kansas City, Missouri, real estate investor, these perks might be the reason you chose to own real estate in the area. If you are new to Kansas City or need a refresher on some of the important security deposit laws, this guide is for you.
Security deposits can protect you from bad tenants, but only if you handle them right. Keep reading to learn more.
1. Maximum Security Deposit Amount
Some states delegate how much a landlord can charge for a security deposit and Missouri is one of those states.
Under these security deposit laws, the maximum amount a landlord can charge cannot exceed more than two months' worth of rent.
To decide how to set a security deposit rate, check the rental price for the specific unit. This means your security deposits for each tenant could be different if their rent prices are different.
If the monthly rent is $1,000, you can't charge more than $2,000 for the security deposit.
Most landlords charge one month's worth of rent as a security deposit. If a tenant seems riskier based on their background check and screening, you might decide to charge them the maximum amount.
2. Storing Security Deposits
Knowing how to collect security deposits requires knowing where to store them. In Missouri, landlords must store security deposits in a federally insured financial institution.
It's not required by law that landlords place security deposits in an interest-bearing account. You can choose to do so and aren't required to share the interest earned from the security deposit with the tenant.
3. Security Deposit Deductions
A security deposit is a returnable fee, but landlords can deduct certain expenses from the total amount. When a tenant moves out, you can legally deduct the following:
- Property damage exceeding wear and tear
- Violations of the lease agreement
- Nonpayment of rent
- Financial loss from tenants abandoning the unit
Move-out inspections will provide you with insights into the condition of the property after a tenant has lived there.
Tenants cannot use their security deposit to pay for monthly rent payments. Some states allow tenants to use the fee to cover the last month of rent, but this is not legal in Missouri.
The landlord must assume the tenant is violating the lease if the tenant attempts to pay their rent using the security deposit. In this situation, you can take the tenant to court for nonpayment of rent.
How Rental Property Management Can Help
Security deposits are necessary to protect yourself from risky tenants. Even if a tenant looks great on paper, it's important to collect a security deposit for any possible damage they do to the property over time.
By understanding the security deposit laws in Missouri, you can stay compliant as a Kansas City landlord.
PMI Fountain City makes security deposit collection and management easy. Our specialized team of experts knows the local laws and ensures an efficient process.
With years of experience, we can handle any property management issues that may arise. Contact us today to learn more about our services.
