First Tuesday Real Estate Online Practice Exam

What is a security deposit?

A one-time fee paid at closing Monthly rent Funds held to secure performance Penalty for breach after tenancy ends

Correct Answer:

Funds held to secure performance

Explanation:

A security deposit is funds the tenant provides at the start of a tenancy to secure the landlord’s protection against the tenant’s potential breach of the lease. The landlord holds these funds (often in a separate account or trust) to cover costs if the tenant doesn’t meet obligations, such as unpaid rent or damages beyond normal wear and tear. It’s not a one-time fee paid at closing, not monthly rent, and not a penalty charged after the tenancy ends. Instead, it’s intended to be refundable at the end of the lease, with deductions for any legitimate damages SAMPLEor unpaid amounts and in accordance with local laws about timing and itemized bills.

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