Keeping Damage Deposits vs. Charging Fines


    withholding security deposits or charging fines to vacation rental guestsIn order to help prevent damage from being done to your vacation rental property by your guests, it's important to inform them of the consequences if your home is not cared for.  You have two options of penalizing renters for damage: deposits and fines.

    Security/Damage Deposit
    The most common way to prevent damage is to charge a damage or security deposit of around $250 or 10% of the total rental amount, whichever is greater.

    This damage deposit is refunded to the renter only after your housekeeper cleans the property and finds everything as it should be. With the damage deposit, it's very important to define common instances where portions of the damage deposits would be withheld. (Note: You can only withhold the amount it cost to repair or replace a damaged item.  Keep all receipts outlining costs associated with the damage.)

    Fines
    A second way to let your renters know that you mean business is to impose fines for specific damaged or missing items. In this case, a fine is a flat fee charged to the renters that is stipulated in the rental contract that your renters must sign. For example, you could charge a $25 fine if the remote control to the television is missing.

    Other things that you could potentially charge a fine for:

    • Evidence of pets on the premises (if you have a no pet policy)
    • Lost or missing items (remotes, keys, garage door openers)
    • Service calls for unreasonable maintenance requests without the homeowner's knowledge
    • Evidence of smoking inside or outside of your home (if you have a strict no smoking policy)
    If you're going to charge fines for specific items/damages, be sure to use the word “FINE” specifically in your contract.  It's important to clearly define and decipher the difference between damage deposits and fines in your contract, because damage deposits are very much regulated in the real estate industry.

    Here's an example of how your policy might be phrased in your rental agreement.


    DAMAGE/RESERVATION DEPOSIT- A damage/reservation deposit of $250 is required. This must be received within three (3) days of booking the reservation. The deposit automatically converts to a security/damage deposit upon arrival. The deposit is NOT applied toward rent; however, it is fully refundable within (14) days of departure, provided the following provisions are met.

    a. A $25 fine will be charged for each missing remote.
    b. A $30 fine will be charged for each missing garage door opener.
    c. A $200 fine will be charged if there is evidence of pets on the premises.
    d. A $200 fine will be charged if there is evidence of smoking on the premises.
    e. A $50 fine will be charged for unreasonable maintenance requests.
    f.  A $75 fine will be charged if you lose your keys or are locked out and require a visit from our housekeeper or a locksmith.


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