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How to Handle Deposits
by Robin Fowler

You know that you should charge a security and damage deposit, to cover yourself and to establish a trusting relationship between you and your customer. But how should you handle it with your renters?

As the owner of a vacation rental property, it is very important that you charge your guests some type of damage/security deposit. A security/damage deposit works to deter renters from causing excessive damage and to pay for any damage or extra cleaning that needs to be taken care of.

The specifics of your security/damage deposit, along with any other fees and refund policies should be outlined completely in the renter’s agreement that you have customers sign upon making reservations with you. This eliminates any gray areas, and keeps confusion and conflict to a minimum.

So, when should you require renters to pay the security/damage deposit? Many renters figure the deposit into the total cost of the rental, which also might include the rental fee, taxes, and regular cleaning charge. This would be outlined in the rental agreement, so that there would be no confusion on the renter’s part. It’s not a bad idea to require 50% of the total fees at the time of reservation, and then the other 50% 30 or 60 days prior to arrival at your property. This gives plenty of time for the funds to clear the bank, in case you have to make refunds for cancellations. This also gives you a little leeway for flexibility, in case of special circumstances with customers that you trust.

When you receive the funds from your renters, deposit them immediately. This will help you take care of potential trouble in the form of bounced or fraudulent checks sooner rather than later!

So, what do you do if your renters did not follow the signed rental agreement, and cause damage or leave an excessive mess? Well, you have the right to keep a portion of the security/damage deposit in order to have repairs made and the extra cleaning taken care of. Depending on the level of mess left behind, you might have to keep all or only a portion of the deposit, but you can only keep the amount equal to the cost for repairs and clean up.

Be sure that the property is thoroughly inspected after the renters have checked out, and be sure to have any damage or unreasonable messes documented thoroughly. If the renters try to contest your withholding of their deposit, you will need to be able to show the proof.

When it comes to returning deposits to renters, make sure that you do so in a timely manner, within 7 – 10 days of departure. This also applies if a renter cancels his or her reservation. But, do not return deposits until the funds have cleared your bank! It is easy to be too trusting, and you might find yourself out of your own money when someone purposely writes a bad check and then requests a refund before it has a chance to clear the bank. It’s a sad situation, but it does unfortunately happen from time to time.

What if you do not want the hassle of writing deposit refund checks to your customers? Some vacation property owners opt to not charge a security/damage deposit at all. Rather, they make written arrangements with renters upon reservation that allows them to charge their credit cards for any extreme damage or extra cleaning that might be required. If you decide to go this route, you will only be able to charge customers for the actual amount that it costs to make repairs and do extra cleaning.

A damage/security deposit is important. Make sure that you outline the specifics in your renter’s agreement, including the amount, how much you want collected when, and how you intend to handle any damage left behind. Being up front with your customers will make for a pleasant owner/client relationship!