I’m not sure whether or not I should collect a last month’s rent. What are the considerations?
Whether the landlord’s decision is to collect the last month’s rent or not, the landlord’s lease agreement should address how the security deposit cannot be used. For example, a lease clause may state “Tenant may not without Landlord’s prior written consent apply the security deposit to the last month’s rent or to any other amounts due by this Agreement. In addition to the issue being in the lease agreement, he landlord should clearly communicate this term and condition to the tenant during orientation.
Despite the restriction of the lease clause, a tenant may ask the landlord to use the tenant’s security deposit as the last month’s rent. The landlord must decide whether he can afford to take a risk and allow the tenant to use the security deposit for the last month’s rent. The risk to the landlord is that there may be property damage when the tenant moves out and the landlord will not have any deposit to apply to repairs or cleaning. In such a case, the landlord would have to absorb the costs or take legal action against the tenant to recover the costs.
The landlord could decide to grant the tenant’s request conditionally. If the tenant has been a good tenant and there is reason to believe the tenant will leave the rental unit clean and in good condition, the landlord may, after a property inspection, allow the tenant to use the security deposit for the last month’s rent.
Despite having options, most landlords choose not to collect a last month’s rent. To those landlords, a better business practice is to collect the maximum security deposit allowed by state statute. If the statute allows collecting more than one month’s rent as the security deposit, the landlord would be covered if the tenant skips paying the last month rent. The landlord could apply excess funds to cover any property damage or cleaning. The landlord would need to file legal action against the tenant if the damages exceeded available funds.