Landlord Security Deposit Bond Claims Guide

The Landlord Security Deposit Bond is required in Florida, Georgia, Illinois, Michigan, North Carolina, and Pennsylvania when landlords opt to not keep security deposits set aside in a dedicated account. The surety bond is for the benefit of the tenant if the landlord fails to reimburse their security deposit or otherwise breaks the statutes.

In most states where the landlord holds the bond, the total amount of security deposits can be held in a trust account, separate from all other monies. Alternatively, the landlord can file a Security Deposit Bond.

The Security Deposit Bond is also known as a Landlord and Tenant Security Deposit Bond or Landlord Escrow Bond.

Jet’s part in the Security Deposit Bond process is providing the surety bond as a guarantee that funds are readily available should a tenant be the victim of financial harm.

Warding off Claims on a Landlord and Tenant Security Deposit Bond

A claim can be filed when violations have been committed. Prohibited landlord acts include:

• Wrongful use of tenant security deposit
• Failing to notify tenant the manner in which the security deposit and interest is being held
• Failing to return the security deposit within the time specified in the statutes
• Withholding an amount from the deposit that exceeds the actual damages
• Failing to pay the tenant interest owed at least once annually

It’s best to address any issues as soon as possible before a civil suit begins. Any action brought against the Security Deposit Bond is dealt with in the court in the county in which the residential dwelling unit resides. If the court determines the principal is at fault and owes money, the Security Deposit Bond may be utilized for immediate restitution. 

Jet’s Claims Process

At this point, the dispute has gone through the court and the court has deemed that the landlord should reimburse the tenant. Still, when Jet receives a bond claim payout notice, we do our due diligence by reviewing the details of the dispute and the documents provided.

For all valid claims, payment is provided by Jet to the financially injured tenant. It’s then up to the landlord to restore the bond to its full amount by reimbursing Jet the claim amount.

How Much Coverage Does the Bond Provide?

The bond claim payout will never be greater than the bond limit. For example, a $50,000 bond limit would allow for up to $50,000 in reimbursement to the damaged tenant. Each state regulator will set the bond limit for each landlord typically in an amount equal to the sum of security deposits that have been collected.

If the money owed is greater than the claim payout allows for, the principal not only owes Jet back but is also responsible for any additional owed amounts.

Landlord Security Deposit Bond Claim Example

Bonnie is the landlord of three apartment complexes and has a $30,000 surety bond. One of her tenants, Rick, paid a security deposit of $2,400 when he moved in. After a year of living in the apartment, Rick gives Bonnie his termination notice. Once the move-out inspection was completed, Rick was told that $75 would be taken from the deposit to do some small fixes to the apartment, but that he would be receiving $2,325 of his refund back within 30 days.

It has been 60 days since Rick moved out and he has not received his deposit. He is starting to worry as he was told 30 days, and he is not able to get ahold of Bonnie (despite emailing and calling her). Rick knows that this is not the standard operating procedure, so begrudgingly, he goes to the local county court.

Rick provides his lease and email correspondence from Bonnie to the court, which both clearly show that Bonnie is in violation of the state laws. Bonnie didn’t show up to the court date to try and rectify the situation, so the court decides that the surety bond will be tapped to allow Rick to receive immediate reimbursement for his financial loss.

Bonnie is not off the hook at this point, but it’s now up to the Surety Company (Jet) to track down Bonnie for the $2,325. Bonnie is also responsible for the court and attorney fees. This indemnification is a part of all surety bonds, that Bonnie and all other principals are part of. Surety bonds are like a letter of credit for the benefit of the public and are not like insurance in this way. So the Surety Company must be repaid, once tapped for a bond claim.