Which of the following best describes a security deposit?

A security deposit is primarily an amount collected by a landlord or property owner from a tenant to cover potential damages that might occur during the lease period. This deposit serves as a form of financial protection for the landlord against any repairs that may be necessary after a tenant vacates the property beyond normal wear and tear.

When a tenant moves out, the landlord will typically assess the condition of the property. If there are damages, cleaning needs to be done that goes beyond what is considered normal, or if any items are missing, the landlord can use the security deposit to cover these costs. Depending on local laws and the terms of the lease, appropriate deductions may be made from this deposit, and the remaining balance, if any, is returned to the tenant.

The other options do not accurately represent the nature of a security deposit. Late rent payments pertain to penalties rather than safeguarding property, application processing fees relate to the costs associated with screening prospective tenants, and money spent on property improvements involves enhancing a property rather than securing it against potential damage.