Security Deposits and Everything You Need to Know About Them

Last modified on August 14th, 2017

Security DepositsSecurity deposits. Every professional property management company requires them but some property managers don’t know the full legal picture. While it’s commonly understood that normal wear-and-tear is acceptable, 26% of renters have reported that their security deposit has been withheld at some point during their life as a tenant. So what types of violations are more than a quarter of renters being cited for?

Security deposit laws are complicated and vary from state to state.

Normal wear-and-tear isn’t always easy to identify. Typically, disputes between a tenant and property manager are settled in court if the tenant thinks the basis of a withheld security deposit is simply normal aging.

In Wisconsin, for example, laws prohibit property managers from retaining deposit funds to cover carpet cleaning. However, a separate fee can be required after the renter surrenders the apartment. Collecting that fee may require a lawsuit or a trip to small claims court.

Renters in Washington are obligated to return their apartment or rented home to the same condition as they rented it in, excluding normal wear-and-tear. This means they’re the responsible party for carpet cleaning, unless they paid a non-refundable cleaning charge when the lease was created.

In states like Massachusetts, certain disputes require the property manager to return the security deposit (and accrued interest) within 30 days of the move out date, and then file a separate small claims or civil suit for damages.

Cover all the bases.

Avoid unnecessary legal challenges by conducting the initial leasing process with diligence. Start by researching local, state, and federal laws that govern real estate rental practices in your area. Consult with a real estate attorney if you aren’t confident you have all the information needed to establish deposit amounts and settle a tenant’s lawful termination of the lease. From there, create a policy that protects your company and your assets.

Go the extra mile during the leasing process.

Prior to allowing a renter to move in, schedule at least 30 minutes for both the renter and company representative to conduct a joint property inspection. Be sure to take notes – and take pictures – of any damage to floors, walls, windows, interior and exterior doors, appliances (inside and outside), fixtures, furniture, patio/balcony, stairs, and any other structural components. Make sure both parties sign and date an inspections form certifying its accuracy.

Additionally, consider initiating a follow up inspection a few days after the tenant moves in. Many tenants find an issue only a few days after they move in – maybe the dishwasher doesn’t drain properly or there is a missing patch of carpet in the bedroom closet. Simply send an email and ask if the tenant has noticed anything else after moving in that they consider prior damage, and ask them to return inquiry confirmation via email or written notice. The response is necessary because there have been lawsuits where a tenant claims they found damage after moving in. This will avoid a he-said/she-said kind of argument that may drag you to court.

Make the exit professional and legal.

Do a preliminary walk through a few days before move-out with the renter in attendance. This gives the renter a chance to return the property to move-in ready condition. Then conduct the final apartment inspection as quickly as possible, before any make-ready begins. Utilize photos, with dates included, for documentation purposes as you prepare an itemized security deposit statement. Be sure to include a complete explanation for any funds withheld.

These tips will help you avoid unnecessary lawsuits and ensure that you stay within the laws governing your security deposit policies. Knowing statutory limits and being prepared is wiser than trying to defend yourself without the proper backup.

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