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While a rental property can be a tremendous investment in Nevada, there's quite a bit that a landlord must stay on top of. A part of it is compliance, but there's another element that is just about protecting one's interests.

For example, it pays to understand landlord-tenant laws in the state and how exactly they factor into the rental agreement.

One of the most fundamental parts of a rental agreement in Nevada is the security deposit. This is guided by NV Rev Stat § 118A.242. A landlord's conduct in the deposit's use and return, among other areas, can make the difference between a smooth process and unwanted penalties.

Of course, you would likely wish to avoid the latter at all costs. Have no fear as you're in the right place. The information below tells you all you need to know about Nevada law and your tenant's security deposits.

Maximum Deposit

Nevada allows landlords to establish a lease agreement that requires a security deposit payment of up to three months' rent. However, it's not the only way to go about things. If there's an agreement between both parties, the deposit can be done away with in favor of a surety bond.

There can even be an agreement to use a combination of both if that is what is desired.

Beyond the tenant's security deposit or surety bond, there's also the matter of an additional deposit for pets on a rental property. This payment is typically equivalent to one or two months' rent.

Note, however, that there is a limit to how the deposit may be applied. According to the Federal Fair Housing Act, those with disabilities should have equal rental property access and enjoyment.

Therefore, if the pet in question happens to be a service or emotional support animal, then there may not be such a charge.

Allowed Deductions

In Nevada, a landlord may only use a tenant's security deposit to cover applicable charges after the rental property has been vacated. With that in mind, it can be used to cover any of the following:

  1. Unpaid rent
  2. Cleaning costs
  3. Any costs associated with damages that go beyond the scope of normal wear and tear (covered later)

The topic of using the deposit to pay rent for the final month is one that often comes up. Technically, security deposits can be used to cover such a rental payment, but this is only true if the rental agreement established this before.

Therefore, if a landlord refuses to accept a security deposit instead of the final month's rent where there is no agreement, there is no wrongdoing on their part.

Normal Wear & Tear

Considering that a security deposit may be used wherever there are damages beyond those that are reasonable, there is the matter of establishing what counts as normal wear and tear and what would be classified as damage.

Normal wear and tear is expected deterioration of a rental property. Faded paint, loose door handles, and stained bath fixtures are all great examples. The identifying factor is the fact that these things will all happen with the normal use of a property.

Once there is no negligence, accident, misuse, or carelessness in the mix and the deterioration aligns with expectations, then it would fall under this category.

Anything beyond that would be considered damages and would be deductible from security deposits. In this case, there is negligence demonstrated on the part of the tenant. Examples include holes in walls, broken windows, destroyed fixtures, and more.

The presence of these things leads to a reduction in the value, usefulness, and normal function of the property.

Tenant Obligations

While the security deposit is usable to cover damages, there will be consequences if a landlord fails to properly classify where this may be applied. Only if the tenant fails to demonstrate compliance with established obligations will deductions be valid.

Put simply, the tenant would need to fail to do one of the following:

  1. Keeping the premises and its plumbing fixtures safe and clean
  2. Properly maintaining any carbon monoxide and smoke detection devices
  3. Adequately disposing of refuse
  4. Using provided facilities such as heating, plumbing, and electricity as expected
  5. Leaving the premises in the same manner it was initially handed over
  6. Complying with stipulations guiding the number of persons that can occupy the premises.

Additionally, a tenant is expected to not:

  • Disturb neighbor's peaceful enjoyment of the premises unreasonably
  • Change the premises' door locks unless an emergency has made it necessary to do so
  • Remove, damage, or destroy any parts of the premises
  • Be involved in or promote any illegal activities on the premises including but not limited to the use of prohibited substances, prostitution, gambling, etc.

If any violations of the above occurred and repairs are deducted from the security deposit, then the landlord acted lawfully.

Returning Security Deposit

  1. From the date of termination, a Nevada landlord has 30 days to return unused security deposit portions to tenants alongside an itemized list for the deductions. This should be mailed to the tenant's present address or delivered to the tenant personally.
  2. If a tenant disputes any of the deductions on the list, a written response to the surety must be provided within 30 days of the statement receipt.
  3. Should a landlord fail or refuse to return a security deposit within the 30-day timeframe, the tenant can recover the full amount in damages plus legal fees that may be associated with recovery in court.

Tax Filing

Security deposits can factor into tax filing, but not immediately as some people may believe. It all depends on the extent to which the funds were used or returned.

Only when a landlord is no longer under any obligation to return a security deposit does it become a part of the taxable income pool.

To make things a bit more straightforward, the IRS has provided a guide that illustrates when security deposits are to be declared as income. These three rules should guide you:

  1. Should a security deposit become forfeited based on a breach of the lease or rental agreement, or because of an application to rent payments, the declaration must take place in the year that the forfeiture occurred.
  2. If both parties have agreed that the security deposit can be used as the last month's rent, then it should be declared as income upon receipt.
  3. Should the security deposit be used to cover chargeable expenses, there is no need to declare it unless the costs of repairs are included as expenses.

Additional Rules

Surety Bond

A landlord and a tenant in Nevada can agree to use a surety bond instead of a security deposit. Note, however, that whatever regulations and laws apply to the deposit will also apply to the surety bond.

Responsibility of a New Owner

A landlord may decide to sell a property while there is a lease active. If this is the case, the new landlord will assume security deposit responsibilities from the former landlord. The initial landlord must notify the tenant of the sale and the transfer of funds, as well as of contact information of the buyer.

Alternatively, there is the option to return the deposit to the tenant minus any applicable deductions.

Receipt Provision

A Nevada landlord must provide a signed written receipt to confirm any security deposit, surety bond, or combination payment.

Nonrefundable Security Deposit

Only a reasonable amount for cleaning may be tagged as nonrefundable in Nevada. If the rental agreement should say otherwise, it is void.

Security Deposit Holdings and Interest under Nevada Law

Under Nevada's security deposit law, there is no requirement to hold security deposits and other funds separately. Additionally, interest on held deposits does not need to be given to tenants.

Final Remarks

Learning how to handle security deposits is mandatory as a Nevada landlord. Hopefully, the information above taught you all you need to know on the matter!

FAQs

How Are Security Deposits Handled with an Ownership Transfer?

The initial landlord must either return the security deposit to the tenant minus any deductions or transfer it to the new landlord and provide the tenant with details of the transfer as well as the contact information of the recipient.

What Happens if a Tenant Does Not Agree with the Deductions Made by a Nevada Landlord?

The tenant must then send a statement to the landlord including the area of dispute. if no resolution can be reached, the matter may have to be handled in a small claims court.

Is a Tenant Allowed to Use a Surety Bond Instead of a Security Deposit in Nevada?

Yes. Even a combination of both can be used so long as both parties agree,

What Proof Is There to State That a Security Deposit Was Collected?

Like rental payments, security deposit payments require a receipt to be provided by the landlord, whether the tenant requests one or not.

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Resources

  1. https://evolvenv.com/security-deposit-law-nevada
  2. https://www.civillawselfhelpcenter.org/self-help/evictions-housing/security-deposits
  3. https://law.justia.com/codes/nevada/2021/chapter-118a/statute-118a-242/
David Bitton

David is the co-founder & CMO of DoorLoop, a best-selling author, legal CLE speaker, and real estate investor. When he's not hanging with his three children, he's writing articles here!