Take Three Steps to Get Tenant to Pay Security Deposit Increase
When you renew a rent-stabilized tenant’s lease and raise the rent, you’re entitled to collect an increase in the tenant’s security deposit. That’s because you’re legally entitled to collect one month’s rent as a security deposit. So if the tenant’s monthly rent rises, you may increase the security deposit to reflect the new, higher rent.
But some tenants may not understand that you’re legally entitled to collect the increase. Or they may understand but be reluctant to pay it. Here are three steps you can take to get a tenant to pay a security deposit increase.
Step 1: Ask for Increase When You Send Renewal Offer
You may be able to avoid any problem by reminding the tenant about the security deposit increase at the time you send the tenant the renewal offer. In the cover letter you send with the renewal lease offer forms, include a paragraph reminding the tenant that you’re legally entitled to the increase. Specify the amount of the increase. Ask the tenant to return the amount with the renewal lease offer forms that he or she signs.
Here’s what your cover letter could say about the security deposit, assuming the rent is increasing by $40 for a one-year lease and by $77.50 for a two-year lease:
We are legally entitled to hold one month’s rent as a security deposit for your apartment. If you choose to renew your lease, we may legally collect an additional amount of security deposit from you, since your monthly rent will increase if you renew your lease. The additional amount is equal to the difference between your current monthly rent and the new higher monthly rent that you will pay under the renewal lease you choose. If you choose a one-year renewal lease, please include payment of $40 as additional security when you return the renewal lease offer forms. If you choose a two-year renewal lease, please include payment of $77.50.
Step 2: Include Extra Charge with Rent Bill
If the tenant doesn’t return the security deposit increase with the signed renewal lease offer forms, add it as a charge to the first rent bill you send under the renewal lease. The tenant may pay the increased amount once it appears on the rent bill.
Step 3: Send Reminder Letter to Tenant
If the tenant still doesn’t pay the security deposit increase, send the tenant a reminder letter asking for the payment. In your letter tell the tenant that you still haven’t gotten the security deposit increase. Then you can repeat the explanation of the security deposit increase that appears in the suggested cover letter paragraph from Step 1.
If all your efforts to get a tenant to pay the security deposit increase are unsuccessful, remember that it doesn’t make economic sense to sue a tenant just for the amount of the security deposit increase. Your court and legal costs would be far greater than the amount the tenant owes you. But if the tenant falls behind on his rent and you start a nonpayment proceeding against the tenant, you can add the unpaid security deposit amount to the amount of the back rent you’re seeking from the tenant. This won’t cost you extra in this situation, because you’re paying for the nonpayment proceeding anyway.