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When a landlord rents an apartment, they can take first, last and a 1 month security – nothing more. However, you don’t have to take all three; you can take only 2 months or 1 month if you choose.
I, personally, do not recommend that you only take the first month’s rent. If the tenant breaks the lease and leaves early or causes damage, the landlord has no recourse. Small claims court is typically not an option since it’s as hard as getting blood from a stone.
The disadvantage to taking 3 months upfront is that it is difficult for some tenants to come up with the whole amount and then there are others who just don’t want to pay. One option is to let the tenant pay 1 month over time. I typically let them pay over 3 months. When I do 1 month over time, I do the last month over time. This is because the last month is the landlord’s money and it is easier for my accounting. I also only do it if the prospect has decent credit and enough monthly income to be able to afford it.
If you decide to take 2 months’ rent upfront instead of all 3, what is the best way to handle this? Should you take a security deposit or the last months’ rent? The security deposit requires that the money be put into an escrow account and that proper procedure is followed. If this is done incorrectly, the landlord may have to pay triple damages under Chapter 93A. The last months’ rent is considered the landlord’s money. The landlord takes this as income when it is received. They can put it into a bank account and give the tenant the interest on this. If it isn’t put into an account, then the landlord pays 5% interest.
Therefore, since the last months’ rent is easier to handle than the security deposit, I would recommend that you take first and last instead of first and security. One could argue that this could be a problem if there is damage, but that is a chance you take if you don’t take all three. If you take the security deposit instead of last months’ rent the tenant may try to use the security as last months’ rent anyway.