Definition
Security Deposit
A security deposit is money a tenant pays a landlord upfront, held as protection against unpaid rent or damage and refundable (less any deductions) at the end of the tenancy.
The deposit amount varies widely by city and custom — modest in some markets but several months' rent in others — and is meant to cover defaults or damage beyond normal wear and tear. It is not rent; the landlord is generally obliged to return it after deducting any legitimate dues when the tenant vacates.
Disputes over deductions and delayed refunds are common, so it helps to document the property's condition at move-in (photos, an inventory), keep payment proof, and specify refund terms and timelines in the rental agreement. Some state rent laws cap deposits and set rules for their return.
Related terms
- Property RegistrationProperty registration is the legal recording of a property transaction with the government sub-registrar, making the transfer of ownership official and legally enforceable.
- Rental YieldRental yield is the annual rent a property earns expressed as a percentage of its value, measuring how much income the asset generates relative to its price.
- Lease vs RentLease and rent both grant the use of a property for payment, but a lease is typically a longer, fixed-term contract while rent (a leave-and-licence) is usually shorter and more flexible.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.