In the event that the tenant does not pay rent, damages the property, fails to pay a utility or other charge, or abandons property requiring the expense of removal, the security deposit may be retained by the landlord as long as he or she itemizes the deductions. We call that bank a secured creditor. A trustee holds the trust res for the benefit of another. Here, a landlord holds a security deposit for his or her own benefit. A security deposit is not a trust res.
Security is assurance, and a security deposit is assurance on deposit with a landlord.
A security deposit in Vermont is money deposited by the tenant into the care of the landlord to ensure the payment or performance of his or her obligations under the lease. If the tenant fails in his or her obligation, the landlord may offset the failure by applying the deposit to the loss. This is more consistent with a debtor-creditor relationship than with a trust. Lastly, the Vermont statute imposes no duty on a landlord to deposit the money into a separate, interest bearing account. A landlord may use the security deposit as he or she wishes, and is under no obligation to segregate.