What is a security deposit?
Updated 2026-09-04 · 6 min read
Not yours
A deposit stays the tenant's money throughout the tenancy; you are its custodian, and in many states its trustee.
A security deposit is money a tenant gives you at the start of a tenancy that you hold against specific, provable failures — unpaid rent, damage beyond wear and tear, and whatever else the statute and the lease both allow. It is not a payment, and it is not yours.
The definition that actually matters
Statutes define a deposit functionally: any money the tenant pays beyond rent, held as security for the performance of the tenancy, however you label it on the lease. That definition is deliberately wide, and it is why calling something a "move-in fee" does not necessarily make it one.
Labels do not decide the question
If the money is refundable, contingent, or held against damage, most statutes will treat it as a deposit — with the cap, the custody rules and the return clock attached — whatever the lease calls it.
Deposit, fee, last month's rent, pet money
| Money taken | Refundable | Usually counts against the cap |
|---|---|---|
| Security deposit | Yes, less lawful deductions | Yes |
| Last month's rent | Applied to the last month | Yes, in most capped states |
| Pet deposit | Yes, against pet damage | Yes |
| Non-refundable pet fee | No | Sometimes — and prohibited outright in several states |
| Application fee | No | No, but often separately capped |
Which column a payment lands in is a question of state law, not of what you wrote on the lease.
What it may be used for
- Rent the tenant owes and has not paid.
- Repair of damage beyond ordinary wear and tear.
- Cleaning to return the unit to its move-in condition — where the statute allows it, and only to that standard.
- Replacing keys, fobs and remotes issued at move-in and not returned.
It may not be used for upgrades, for routine repainting between tenancies where the statute treats that as wear, or for anything you cannot evidence with a receipt or a written estimate. The line between wear and damage is worked through in security deposit deductions.
A worked example of a real rule
California's Civ. Code § 1950.5 (checked 2026-09-04) does all four jobs in one section: it caps the deposit at one month's rent — two for a small natural-person landlord — requires an itemised statement, and gives the landlord 21 calendar days after the tenant has vacated to send it with any balance.
Your state's version will differ in the numbers and rarely in the shape. Find it through security deposit laws by state.