In Leasing
Security deposits are required most often by lessors of automobiles, apartments, and commercial real estate.
The security deposits required by many residential landlords of their tenants are the source of much dispute and litigation. Many states and municipalities have enacted laws that specifically regulate the landlord's ability to withhold tenant security deposits after a tenant moves out. Some states and cities require that interest be paid to the tenant as it is earned on the security deposit.
In some legal regimes the deposit has to be placed with an independent escrow agent or licensed deposit taker such as a bank so that the risk of fraud is reduced and the funds earn interest at a fair market rate.
In the United States of America Washington DC, Alaska, Illinois, and Wisconsin have notably more tenant-friendly legislation in place than states like Indiana or Michigan, for example. Within Illinois and Wisconsin, the cities of Madison, Wisconsin and Chicago, Illinois have in place substantially greater protection of tenants' security deposit rights than the surrounding areas.
Read more about this topic: Security Deposit