SmartDep™ - Security Deposit Replacement™ Program Frequently Asked Questions (FAQ)

What is SmartDep?

SmartDep is a Security Deposit Replacement™ program that offers the perfect alternative to traditional security deposits. Typically new tenants are required to pay an upfront security deposit prior to move-in, offering the landlord protection against damage to the unit and skipped rent. The SmartDep - Security Deposit Replacement program gives a landlord the same peace of mind without the significant upfront cost of a security deposit for the tenant.

What options does the SmartDep offer?

The SmartDep - Security Deposit Replacement program offers two plans - our Total Property Plan and Single Unit Plan.

The Total Property Plan requires a landlord to issue the security deposit waiver on all units of a participating rental property. The Total Property Plan offers several distinct advantages for the landlord - increased property marketability, higher occupancy rates, additional revenue, enhanced damage protection and a significant reduction of administration costs.

The Single Unit Plan allows a landlord to offer every prospective tenant the option to purchase the security deposit waiver in lieu of a traditional security deposit. The Single Unit Plan option offers the landlord more flexibility as well as higher occupancy rates, additional revenue, enhanced damage protection and a significant reduction of administration costs.

How does SmartDep work?

Once set up, the first step in the process is that a landlord will screen the prospective tenant using the Renter Report Card™ to determine if the tenant meets the landlord’s rental criteria. The Renter Report Card screens the prospective tenant using the PRBC® Consumer Report with FICO® Expansion® Score, a traditional credit report with FICO® Score, Enhanced Evictions Report, a national Sex Offender and international Watchlist Search, advanced anti-fraud and identity verification tools and any other reports the landlord may choose.

The Renter Report Card will also give the landlord an Approved or Declined message for that prospective tenant. If the tenant is approved, a landlord may issue the security deposit waiver which will cover the landlord and tenant for up to $3,000 in accidental damage protection on the unit and cover the landlord up to $1,500 in skipped rent protection. If the tenant is declined, the landlord will not receive skipped rent protection for the tenant, but will be covered for accidental damage up to $3,000 if the landlord leases to the tenant. Once the tenant is accepted by the landlord, a Security Deposit Waiver is generated and becomes an addendum to the tenant's lease.

What damages are covered?

Because no one can anticipate all the possible ways that a tenant might cause damage, we do not limit protection to a specific list of possibilities. Instead, we cover "all" inadvertent damages which are not specifically excluded (i.e. wear and tear). For those familiar, this is similar to the broader "all risk" approach in property insurance as opposed to the more limited "named peril" method. With the exception of intentional damage which is difficult to prove, it allows our program to closely mirror the use of a damage security deposit.

How is the amount of damage determined?

First there is an attempt to repair the damage. If that isn't possible, and the property has to be replaced, it is done on an actual cash value basis. That is the cost to replace new with like kind and quality minus standard depreciation. This is similar to what most security deposit laws allow you to deduct from a damage security deposit. In other words, you can't make a tenant pay for full replacement cost on carpet that was five years old when the lease began.

How many units do I need to participate in the SmartDep?

There is no minimum or maximum number of units owned or managed to participate in the SmartDep - Security Deposit Replacement program. Security Deposit Replacement is the perfect security deposit risk management tool if you own just a single rental unit or manage thousands.

What about pets?

Yes. For an additional fee, the protection can be included for damages as a result of pet incidents.

Does a tenant have to wait until they move out to make a claim?

One of the key advantages for you and your tenants is that claims are made as accidents occur. If your tenant spills a glass of red wine on the carpet that cannot be cleaned normally, they should notify you immediately for professional cleaning. There is no need for them to live with that stain until the lease expires and worry about the cost of repair or replacement being deducted from their security deposit. Accidents happen and repairing damages as they occur keeps your tenants happy and your property in top condition.

Is the security deposit waiver just a tool to help lower a tenant’s move-in cost or is there a true transfer of risk?

The security deposit waiver is a true transfer of risk. If the tenant accidentally damages the unit or furnishings or fixtures owned by the property manager or landlord, they are protected. With a traditional security deposit, the money comes directly out of the tenant's pocket. This program eliminates the worry of "when" and "how much" of the security deposit the resident will receive back.

Who backs the SmartDep - Security Deposit Replacement program?

The financial obligations behind this plan are insured through a policy issued by Virginia Surety Company, Inc.

How do I get started with SmartDep?

Contact your MicroBilt Account Manager to get a copy of the SmartDep Landlord Application. We need a little information about your rental portfolio and can approve your application within two business days.

Can a landlord continue to collect a cleaning fee from tenants while offering SmartDep?

Yes, and it is a suggested practice in all states and localities that allow for cleaning fees. Removal of trash and excessive cleaning due to a lack of general housekeeping will not be considered damage and are not covered under the plan.

What are the most common types of damage protected by SmartDep?

Damage caused by pets and children tend to be the most common types of incidents. These typically include flooring and/or wall damage. There are hundreds of different types of accidents that can cause damage to a rental unit. The SmartDep Brochure illustrates a few different types of accidents that would be included.

Can a landlord pursue a tenant for 'intentional' damages?

Yes. Although intentional damage rarely occurs to rental properties, there have been instances where irresponsible tenants or their guests have intentionally damaged property. This article details a "demolition party" from early 2010 that depicts what would be considered 'intentional damage'.

If damages exceed the selected $1,500 or $3,000 damage protection, can a landlord pursue a tenant for additional damages to the unit?

Yes. By utilizing the security deposit waiver, the landlord 'waives' a tenants liability for damage to the unit up to the selected coverage amount. The landlord should pursue the tenant for any additional damages.

What do you consider ‘Skipped Rent’?

A claim for ‘Skipped Rent’, also referred to as lost rent, unpaid rent, or delinquent rent, can be made if a certain month’s rent is not paid by the due date of the following month’s rent. Rent due on July 1^st and not paid by August 1^st would be considered a ‘Skipped Rent’ under the SmartDep Program.