HUD Handbook 4350.3 § 6-15

A.          It is recommended the owner collect a security deposit at the time of the initial
                    lease execution.

        B.          Security deposits provide owners with some financial protection when a tenant
                    moves out of the unit and fails to fulfill his/her obligations under the lease.
                    Additionally, many programs require that owners place security deposits in
                    interest-bearing accounts and allocate the interest to the tenant. This
                    requirement varies by programs and depends to a certain extent on state and
                    local laws.

        C.          The owner must collect a security deposit at the time of the initial lease execution
                    for the following properties:

1.     Section 8 New Construction with an AHAP executed on or after
                           November 5, 1979;

                    2.     Section 8 Substantial Rehabilitation with an AHAP executed on or after
                           February 20, 1980;

                    3.     Section 8 State Agency with an AHAP executed on or after February 29,
                           1980;

                    4.     Section 202/8;

                    5.     Section 202 PAC;

                    6.     Section 202 PRAC; and

                    7.     Section 811 PRAC.

        D.          The amount of the security deposit established at move-in does not change when
                    a tenant’s rent changes.

        E.          The amount of the security deposit to be collected is dependent upon:

                    1.     The type of housing program;

                    2.     The date the AHAP or HAP contract for the unit was signed; and

                    3.     The amount of the total tenant payment or tenant rent.

                           *Figure 6-7* outlines the amount of the security deposit the owner may
                           collect for each of the different programs.

        F.          The owner must comply with any applicable state and local laws governing the
                    security deposit.

        G.          The tenant is expected to pay the security deposit from his/her own resources,
                    and/or other public or private sources.

        H.          The owner may collect the security deposit on an installment basis.

I.          The security deposit is refundable. (See paragraph 6-18 for more information on
                    refunding a security deposit.)

        J.          An applicant may be rejected if he/she does not have sufficient funds to pay the
                    deposit.