A non-refundable deposit is a type of fee or security, usually charged to the tenant and then refunded in terms of value, typically through one month of the rent, or fees. 

What is a Non-Refundable Deposit?

While a deposit is, by definition, refundable, the non-refundable deposit is usually a surcharge on top of the initial security deposit. In some cases, this can include a portion of the security deposit or all of it. You can also charge additional fees for various moving in costs. By charging a non-refundable deposit, you save yourself the hassle of moving money around, allow yourself access to it, and avoid some other hassles.  

Last Month’s Rent 

The most common non-refundable deposit is one additional months rent. Unlike a standard security deposit, your non-refundable last month’s rent does not have to be paid back, which has a number of advantages including that you can keep any interest accrued over the deposit during the duration of the tenancy. This means more money for you. It also means that you will have to pay tax on it immediately, because it is not in limbo, like a traditional security deposit. However, this is not the security deposit itself, and can actually be charged in addition to the deposit.  

Additional Fees

You can also decide to charge additional fees on top of the last month’s rent and security deposit. These can include various moving in charges as well as pet fees. The two most common items are replacing locks, pet fees and making spare keys. You cannot charge more than the keys and locks cost, so it is important to get a bill and itemize the fee before charging it. For pets, you can choose to charge either a flat rate fee to cover any potential damages, or choose to take the amount out of the security deposit.  

Keeping a Portion of the Deposit

If you choose to outline that you are keeping a portion of the deposit in your tenancy contract, then you can do so. One example is keeping 30% of the deposit to cover inspection fees, showing fees, tenant holdover or apartment cleaning. It is important to itemize these costs in the contract to ensure that the tenant knows what they are paying for.  

Are Non-Refundable Deposits Legal

A non-refundable deposit is perfectly legal in two cases. The first case is that you use the deposit towards a month of rent and the second is that you use the deposit towards pre-outlined fees, repairs or costs. It is vital that you write this information up in your lease agreement.  

Charging a Non-Refundable Deposit  

It is extremely important that the tenant know upfront that they will not receive their deposit back. This is important for two reasons. The first is that you want them to be fully informed when they make the payment and the second is that you want to comply with law. If the deposit is not listed as non-refundable in your lease contract, then the tenant can technically take you to court for reimbursement. By putting the terms “non-refundable’ and specifically stating what the fee is for in your tenant contract, you avoid this issue. If you aren’t sure how to phrase this properly, a Bellevue property manager or a real estate lawyer can help you with the specifics.  

Reimbursing a Non-Refundable Deposi

One consideration is that you do have to reimburse the non-refundable deposit in some way. No matter what your reasoning for charging a non-refundable deposit, it is important that you fulfill the obligation created by it. For example, if you are charging an inspection fee, make sure that you get the inspection and keep the receipts.  


Want to know more about non-refundable deposits? Contact Bellevue Property Management for help with all of your paperwork and management. 

Posted by: eirikolsen on April 21, 2015
Posted in: General