What can landlords do regarding the holding of security deposits?

Landlords have specific rights concerning the handling of security deposits, and one of the primary rights is the ability to retain these deposits to cover damages or unpaid rent.

Security deposits serve as a financial safeguard for landlords against tenant actions that may cause property damage or situations where the tenant fails to pay rent. If a tenant leaves a property in less than acceptable condition or owes back rent at the end of their lease, the landlord has legitimate grounds to use the security deposit to address these issues. This practice is typically defined by lease agreements and local landlord-tenant laws, which regulate how landlords can manage and utilize these deposits.

Other options, such as investing security deposits in the stock market or using them as personal funds, are not permissible actions. Security deposits must be kept separate and secure, as they represent funds that are not the landlord's personal money but rather protection funds for the property. Additionally, while some jurisdictions may allow landlords to hold security deposits for a specified period without interest accrual, the critical part of why the correct answer stands out is that the primary function of these deposits is for retaining them for damages or unpaid rent. This ensures that tenants fulfill their obligations under the lease agreement.