Property Management Blog

Property Management Advice: How to Handle Security Deposit Returns

Lidieth Macicek - Friday, March 4, 2022
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Security deposits are an important tool for landlords since they can protect their property from unforeseen damages. Essentially, a security deposit is an amount the tenant pays when their lease begins. It can help a landlord when a tenant cannot pay their rent or has caused damage to their property. 

When security deposits aren’t appropriately managed, it can cause financial problems for the landlord. As a landlord, you must know your respective state’s laws for a security deposit. This article discusses how you can handle security deposit returns and the potentially expensive mistakes you can avoid. 

Deadlines for Returning Security Deposits

States around America have different laws for returning the security deposit to a tenant. According to most states, the security deposit has to be returned after 30 days of the tenant moving out with the Notice of Damage. This notice is an itemized list that reflects any deductions made by the landlord for any damages. However, there is an element of responsibility here that needs to be fulfilled by the tenant. 

The tenant must provide the landlord with a forwarding address after a set number of days of departure from the property. If the tenant doesn’t provide an address, the landlord isn’t required to give out a Notice of Damage. However, the landlord must return the money left in the tenant’s security deposit. To ensure you stay protected, we recommend that you still send the notice even when you don’t have a forwarding address. You can then send it to the client’s last known address. 

Withholding a Security Deposit

The landlord can use the security deposit to make any essential repairs to get the property back into tip-top condition. The landlord can also charge the security deposit for cleaning. However, the landlord can’t charge it for routine maintenance or wear and tear issues that a landlord is responsible for during the lease. It can be charged for past due utilities or unpaid rent. Moreover, if a key wasn’t returned, the landlord can also charge for that. 

Those small scuff marks on the furniture or the wall are wear and tear. If a landlord is charging the tenant for damage, it must’ve caused it because of the tenant’s negligence, misuse, or abuse. It’s vital that both parties can differentiate between wear and tear and deliberate damage. 

Handling Security Deposit Disputes

First and foremost, a landlord must be thorough and careful with their documentation. A good move-out and move-in inspection with several notes and photos are beneficial. It will give a clear picture of the property when the tenant moved in and what it looked like when the tenant moved out. If the tenant disagrees with the itemized list of deductions, then the dispute has to be raised within a specific period after receiving the notice. 

The Federal Law decides the duration of this. The tenant can also initiate a claims court action against the landlord. It would benefit both parties to handle their differences outside of court since legalities can be confusing for everyone. Assess the documents together and see if you both agree on the amount that should be deducted or not. 

In both cases, both parties would not want to lose money, but then again, they would not want to face a federal judge as well. Try to consider whether the $100 that you’re charging your tenant is worth the effort and time or not. 

Wrapping Up

In every case, it’s essential to remember that both parties have legal rights and can take the other to court if there’s anything unfair involved. In most cases, security deposit returns should not create severe disagreements, but they can be hard to deal with when they do. A property manager is well-versed with the complexities involved, and they can help you in this case. Hire one today and make your life easier. 

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