A security deposit is often, but not always, equal to one month of rent. Ideally, it helps the landlord or property manager pay for any repairs or cleaning that the property needs when the tenants move out. When the cleaning is over, the landlord sends their tenants a check for what remains from the deposit.
It sounds simple, right? Unfortunately for novice landlords, it’s hard to know exactly what to charge to a security deposit. Any miscalculating — whether accidentally or on purpose — is a great way to get angry tenants and a bad reputation for yourself.
Why Should You Give Back A Security Deposit at all?
Some landlords make their tenants hunt them down to give back their security deposits. Others don’t refund security deposits at all, effectively levying an extra month’s worth of rent from tenants.
These practices aren’t legal in a lot of jurisdictions, and you may find yourself in small-claims court if you don’t refund a security deposit when necessary; check your local laws to learn the details. Additionally, refusing a deposit refund makes your tenants very upset because, for a lot of tenants, a security deposit is a lot of money. Even if you never hear a bad word from your renters about it, their family and friends will — not to mention the whole Internet. Future tenants become much less likely to rent from you if they hear that they probably won’t get their security deposit back. Being unable to rent your properties out is not worth the money you get from holding onto the security deposit.
Therefore, it’s best to give back your security deposit. If there’s a delay, communicate that to your tenants. If there’s a dispute between you, remain as straightforward and clear as possible while always holding onto all records of your communications about the rental agreement.
Security Deposit Deductions 101
When your tenants move out, you’re likely to find wear and tear on the property: paint peeling, smudges on the walls, scratch marks and so forth. You can also discover actual damages: holes in walls, broken windows or torn carpet. Only heavy damage is generally considered fair game when deducting from a security deposit.
Remember that even a model tenant can have deductions from their deposit. As you walk through, photograph all damages so that you have a record if the tenant disputes your charges. Remember also that not all damage in a landlord’s eyes is damage in a tenant’s eyes. For instance, imagine that your tenant painted a wall a different color. It may look nice, and the tenant may have had the best of intentions. However, if you need to repaint the wall, that’s still property damage — especially if they never communicated it to you. If they did tell you before painting and you said it was fine, then billing them later isn’t fair — even if you changed your mind.
If you need to call in a repairman or a cleaning team after tenants vacate the premises, so that they can do badly needed cleaning, billing the tenant out of the security deposit is fair. If it’s a standard practice at your properties to call in professionals — to repaint all walls in your properties, for example — don’t deduct unless the damage goes above and beyond normal wear and tear. If you yourself are doing the repairs, keep a close eye on your time, and then you can bill tenants for your own work as you would for a professional doing the same job. Security-deposit deductions aren’t just to compensate for the time spent on repairs; they also pay for new materials. It’s also fair to bill out of the security deposit for anything that needs replacing, like doorknobs, hooks or appliances.
As a rule of thumb, any damage you don’t find within a week or so of your tenant’s departure isn’t eligible for a security-deposit deduction. If your new tenant finds damage a month after moving in, billing the old tenant for it isn’t really an option.
These deductions can add up. Keep a carefully itemized record of deductions. Ideally, give that information back to the tenant when you send back what remains of the deposit. Don’t forget to leave them your contact information so that they know how to get in touch with you if they dispute any charges.
