Security Deposit Credit Card Hold

We used to take a cash deposit from our guests for each rental. Starting in 2020 we began using the guests credit card to be the security deposit on rentals. This works identically to the way a hotel will ask for a credit card before a stay commences. Here is the way it works.

  1. We collect a credit card when you make your reservation.
  2. About five days before your rental commences, we place a "HOLD" on your available funds for whatever amount the property owner has specified. A typical security deposit is $2,000.
  3. A hold does not withdraw any funds or make a charge. It simply reserves a portion of the guests available credit. For example; if you have a card with a $10,000 limit and it is paid off completely the system will hold $2,000 o that. You will then have $8,000 left to spend of your credit cards credit. Please make sure your card has enough credit on it to allow for this deposit. It is actually "best practice" to pay your card off 100% each month. This builds the best credit score and prevents the possibility of paying interest.
  4. We automatically release the credit hold approximately five days after your vacation is over. There is no need to call unless you have not seen this release or an email from us within two weeks of your departure.

A few notes on how banks handle this. Some banks will display this credit card hold to you as a charge. It is not a charge. It is a hold. Some banks will also flag this transaction with a fraud alert. In that case you will need to call the number on the back of your credit card and approve the Hold.

If damage is suspected we will make a charge to your card for the estimated amount of the repair and then adjust this charge once the repair is completed.

Security Deposit Insurance

Starting in 2020 we also began using additional insurance to ensure your deposit's return.

This is a policy that will protect you against inadvertent damage. If you or a guest actually cause malicious damage or do something not allowed in the lease then the policy does not work. I have listed the exceptions found in one of the policies below.

We like to have the TENANT be responsible for their guests and watchful over the property as if it were their own. The only way to do that is with your deposit being held by me. If you have insurance instead of your own money at risk then there is the moral hazard that you might not be as careful with the house. If I am going to entrust this historic house full of antiques to you then I must have a deposit of some significance. $3,000 (for example) may seem like a lot but it is just 0.0005 of the value of the home.

Here are some links if you want to do some more reading on it

Two examples of websites providing insurance
https://www.vacationrentalinsurance.com/vacationrentaldamage.do

VACATION RENTAL DAMAGE COVERAGE - INSURANCE EXCLUSIONS

(I thought you might like to see the typical exclusions written into the insurance.)
If you occupy an Accommodation and you damage the real or personal property assigned to that Accommodation during the Trip, we will reimburse you the lesser of the cost of repairs or the cost to replace the property, up to the amount shown in the Schedule.
Coverage is provided to you and all travelers under the Accommodation reservation during the Trip provided you are listed on the lease agreement. Coverage is not provided for loss due to:
a. inclement weather or natural disaster;
b. your intentional acts or gross negligence;
c. normal wear and tear of the real or personal property assigned to the Accommodation;
d. any damage that occurs if you are in violation of the lease agreement;
e. loss, theft, or damage to any personal effects owned by you or brought on the covered Trip by you;
f. loss, theft, or damage caused by any person other than you or your traveling companions with whom you share the Accommodation reservation unless substantiated by a police report.

Security Deposits

Back to the Frequently Asked Questions

This is a step by step explanation of the way that we handle deposits here at the Captain Morse House.

  • We go to extra effort to make sure that the Tenant that signs the lease and puts down the deposit knows that they are in charge of their guests. With a large group we recommend that a House Captain gets appointed to share this responsibility.
  • We have extensively documented all of the systems, rules, and suggestions within our House Manual. Guests should read this and be familiar with it.
  • Please inspect the house at the start of their stay at the house. This paragraph from the welcome page gets sent to each guest prior to entering the property. On the Day of arrival at the house Call the caretaker around noon to confirm your arrival time at the house so that you can be met. The caretaker will then be able to give you a tour of the house and a “statement of condition”. Anything that is amiss or broken should be brought to the immediate attention of the caretaker. If you notice anything other damage to the premises it must be reported to the caretaker via email with pictures within 6 hours of the start of your lease. Be thorough because if there is damage or missing items at the end of your stay we can only assume that you are responsible. An email with pictures is the only way to properly notify us. Send any comments to support@captainmorsehouse.com
  • After a rental: Our cleaner and caretaker both inspect the property and file reports. Once these are received we then report any damage to the departed guest (if any) and ask for feedback on the damage. Once the feedback is received we then process the return of the security deposit.
  • Deposits are returned within 60 days as the absolute outside time limit. The vineyard is a very difficult place to get any work done. 60 days seems like a lot but it is simply because of the business environment here on the island.
  • Some guests say that we need to return within 30 days. The answer is that rentals of less than 100 days are not constrained by Mass. laws that apply to longer-term rentals. The laws regarding security deposit returns are at the bottom of this page c. 186, 15B (9) (The provisions of this section shall not apply to any lease, rental, occupancy or tenancy of one hundred days or less in duration which lease or rental is for a vacation or recreational purpose). See also the End Notes from Mass Legal Help in Chapter 3 page 53 of this pamphlet
  • We miss more than we catch. Each fall I come to the island to work on the house. We always find damages that were missed by our incoming guests, caretaker, and cleaner.
  • OVERRIDING PHILOSOPHY - We just want to get the house back to where it was when you entered it for the start of your vacation. We don't care about minor wear and tear and we often forgive minor damage but if there is damage we want to fix it for the next guest and to keep the property up. We think that our guests should participate in that effort.
Here is some history on my return of deposits just to give you an idea of how I have handled it in the past.

In 2016 I returned deposits to tenants who had no damages in as little as 3 days. A lot has to do with getting reports from my manager and cleaner. They are not always as fast as we want but they are under a lot of stress and demands in the summer. I try to return deposits back in 30 days but allow 60 days in the lease. For guests that have no damage (13 of 16 rentals in 2016), they got their full deposit back in an average of 10 days.

Where there was damage it often takes time to complete the repairs and get the bills from the repairmen. In those cases I communicated to the guest exactly what the damages were and included photographs, I give the guest a chance to respond, and then returned the agreed-upon balance within 25 and 55 days. I did 16 rentals in 2016 and 3 of them had deductions for damages. Seeing as we handle wedding parties and large families with kids I thought that was pretty good.

The use of damage insurance has rendered almost all of this moot. We normally just process the damage through the carrier. That said please let us know if anything is broken so we don't discover it on our own.

I am happy to provide references. I also think that our reviews speak for themselves.
Reviews and Comments

If you enjoy reading about this subject ( I don't) here are the source I used.

Mass Law Section 15B: Subsection 9 is here.

https://www.mass.gov/courts/case-legal-res/law-lib/laws-by-subj/about/securitydeposits.html

https://www.attorneyross.com/landlord.pdf Page 32
The security deposit and last month's rent law does not apply to any rental for a vacation or recreational purpose of 100 days or less in duration.

Page 36
If you are the owner-occupant of a two-family or three-family house and own no other rental property, you are not considered to be engaged in a trade or business and are not subject to this law.

 

CONCLUSION

We have been renting since 2008. Each year we do about 20 rentals. Our only desire is to make sure the house can be put back into the same condition it was before the rental started, wear, and tear accepted.
Let us know if you have any other questions about our security deposit policies.

Back to the Frequently Asked Questions

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