Cincinnati Landlords Must Give Renters Security-Deposit Options

Cincinnati Landlords Must Give Renters Security-Deposit Options

The Cincinnati City Council has passed an ordinance that takes effect in 90 days requiring landlords to give potential tenants security deposit options to traditional cash security deposits, according to reports.

Cincinnati is the first city in the United States to pass such a program, but others are considering security-deposit options for tenants.

Small landlords who own 25 or fewer units are exempt from the Cincinnati city ordinance.

One of the options is rental insurance, which allows renters to pay a small premium each month instead of a making one larger cash security deposit.

“For a significant number of people living in Cincinnati, a security deposit for a two-bedroom would equal or exceed the totality of their savings,” said Cincinnati City Councilman P.G. Sittenfeld, sponsor of Cincinnati’s new deposit law, in an interview with the Wall Street Journal. “To put down $1,000 up front, that’s a significant expense for some people.”

Under the city ordinance, once a potential tenant requests an option besides the standard cash security deposit, the landlord can then pick from three different security deposit options to offer the renter, according to the Cincinnati Enquirer:

  • Rental security insurance, where tenants can pay as little as $3 a month. Instead of paying first month’s rent and a security deposit up front, they pay $5 a month in insurance premiums for the duration of the rental. They don’t get that money back, but the idea is making getting into the rental a possibility.
  • An installment plan, where the security deposit is paid over a period of no less than six months.
  • Payment of a reduced security deposit, which can be no more than the equivalent of 50 percent of the first month’s rent.

Cincinnati requires that insurance providers be approved by the state, offer monthly premiums and provide coverage for the entire lease term.

Landlords pushing back against security-deposit legislation

Many landlords are already pushing back against the security-deposit legislation. They say collecting all-cash security deposits at move-in is necessary to protect their assets, and to and make sure a tenant doesn’t skip out without paying the last month’s rent.

Landlords also say that insurance plans would likely leave them fighting with these companies for claims, when they would previously have the tenant’s deposit already in hand.

“Now I’m in a whole different realm,” said Charles Tassell, chief operating officer of the National Real Estate Investors Association. “I’ve got to deal with an insurance claim and get my attorneys involved. And they’ve got their high-priced attorneys in-house.”

A series of startups have risen to offer alternative solutions to the security-deposit problem for renters, with what basically is an insurance product. Firms like Jetty, Rhino, TheGuarantors and Insurent all have slightly varying structures but all allow consumers to pay a much lower fee for insurance on the apartment, as opposed to a large cash deposit up front. Not all of these companies are available in all states.

The renter then either pays a monthly fee for the insurance for the term of the lease or a one-time payment to the third-party insurance provider. At the end of the term, the startup then takes responsibility for any damages or claims against the lease for the tenant.


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Legislation May Require Landlords to Accept Security Deposit Insurance In Lieu of Cash Deposits

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