Many first-time property investors know little about security bonds and where they’re held after being taken from tenants, a landlord insurance company has claimed.
According to Terri Scheer Insurance, it’s not uncommon for first time investors to have little idea about where bond money goes after it has been collected, why it has to be held, and in what circumstances it is to be retained.
Terri Scheer Insurance manager, Carolyn Majda, made the statement as part of an alert sent to novice landlords about how security bonds worked. This included ensuring paperwork was completed quickly and accurately.
“For example, the bond amount must be stipulated in the lease agreement - even if it was clearly listed when the property was advertised,” she said.
"This ensures potential tenants are aware of the amount they are required to pay upfront so there are no surprises.
"Once tenants have paid the bond, it is also important to issue a hard-copy receipt so you and your tenants have a written record of the transaction if any disputes arise during the tenancy.”
She also recommended that landlords – and property managers - meet with tenants to explain the security bond process.
"Talk through the process with your tenants in person, as it will give them the opportunity to ask you questions," she said.
"The more your tenants understand about the purpose of security bonds, the more likely they are to treat your property better so they receive their refund at the completion of the lease.
"A good time to do this is when you meet to discuss and sign the lease agreement."