LANDLORDS!!! - How to Handle The security deposit?

Rental Property Investor · Phila, PA · Member since 2018 · 554 posts · 118 votes

- How do you handle your security deposit? Do you use it for fixing the damages during the tenants stay?

- When the tenant leaves and demands security deposit back, how do you handle this?

- In PA, I can hold for up to 30 days, should I use the security deposit to assess damages and wear&tear, then give them the remaining?

Example: Woman with 5 kids just moved out after 2 years, carpets are destroyed, it’s not normal wear and tear, I got a 1.2k security deposit. My damages to cover with the new carpet with be 800.00

should I give her partial deposit back? Should I hold it up to my 30 days before I even think of giving anything back?

3 Reply

364 views

Most Popular Reply

Thomas S.

Member since 2016 · 13k+ posts · 12k+ votes

During your normal inspections all tenant caused damage is repaired immediately and billed back to the tenant. Never use the deposit for repairs during the tenancy, Deposit is only to be applied to damage discovered after move out.

I inspect my properties quarterly. Change filters, check smoke/fire aarms, check for mold and over all upkeep of property, check all plumbing for leaks. Complete exterior inspection of structure and landscaping.

16 Reply

See this reply in the discussion

67 Replies

Jump to latestLatest

Sort by

James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
7y
Originally posted by @Cameron Riley:

@James Wise
James, I hope you see this.
What if there were multiple lease violations and they left without eviction.
Can I hold
The deposit?
Do they owe you rent?
0 Reply
Michael Noto
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
7y
@Cameron Riley The below is directly from the Connecticut state website in regards to the timelines for when landlords need to return security deposits to tenants, and it also discusses the forwarding address issue. I am sure your state has these guidelines outlined somewhere also.
Yes, tenants will definitely test you as a young landlord. I was a landlord in my early-mid 20's and experienced the same and I still do now from time to time. This is why it is important to know the laws, procedures, and guidelines that govern the business you are in. It takes the emotion out of things for the most part.
"Landlords must return security deposits with interest or give tenants written notice of damages being claimed within thirty days of when tenants move. The only exception is if a tenant fails to provide a written forwarding address: landlords then need not return security deposits or provide a notice of damages until fifteen days after receipt of a forwarding address in writing.
If a landlord does not return a security deposit with interest or provide a written notice of damages within these statutory time limits, the landlord may have to pay the tenant twice the amount of the security deposit. Tenants may pursue this remedy in court. For further information, see the section on options for resolving disputes.
A landlord's written notice of damages must itemize the nature and amount of tenant damages, including any unpaid rent or utility payments, and must be accompanied by the balance, if any, of the tenant's security deposit not being claimed for damages plus interest."
0 Reply
Joe SplitrockPro Member
Moderator
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
7y
Originally posted by @Michael Noto:

@Cameron Riley The below is directly from the Connecticut state website in regards to the timelines for when landlords need to return security deposits to tenants, and it also discusses the forwarding address issue. I am sure your state has these guidelines outlined somewhere also.
Yes, tenants will definitely test you as a young landlord. I was a landlord in my early-mid 20's and experienced the same and I still do now from time to time. This is why it is important to know the laws, procedures, and guidelines that govern the business you are in. It takes the emotion out of things for the most part.
"Landlords must return security deposits with interest or give tenants written notice of damages being claimed within thirty days of when tenants move. The only exception is if a tenant fails to provide a written forwarding address: landlords then need not return security deposits or provide a notice of damages until fifteen days after receipt of a forwarding address in writing.
If a landlord does not return a security deposit with interest or provide a written notice of damages within these statutory time limits, the landlord may have to pay the tenant twice the amount of the security deposit. Tenants may pursue this remedy in court. For further information, see the section on options for resolving disputes.
A landlord's written notice of damages must itemize the nature and amount of tenant damages, including any unpaid rent or utility payments, and must be accompanied by the balance, if any, of the tenant's security deposit not being claimed for damages plus interest."
If I don't get a forwarding address, I always mail the security deposit deduction letter and check to last known address, certified signature required. Last known address is your property. It will be forwarded to their new address, assuming they setup mail forwarding. If they didn't setup mail forwarding, it will be returned to the landlord, post marked and stamped non-deliverable. If it is returned, leave it in the envelope, unopened. If you are called into court, bring the sealed envelope as proof you tried to mail it to them. It is just one more way for a landlord to prove they are responsible and the tenant is irresponsible (no mail forwarding).
Some states require mailing to last known address. Also make sure you have made a reasonable attempt to get the tenants forwarding address. Send them a text and e-mail requesting it. Some landlords just say, "they never gave it to me", yet make little to no attempt to get it.
Some tenants refuse to give an address because they believe they are getting no money back and fear you will go after them for more money.
2 Reply
Mindy JensenPro Member
BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
7y
Wow, there is a lot of general misunderstanding of landlord tenant laws in this thread.
1. You are REQUIRED to provide an accounting of how you spent ANY portion of the security deposit. You owe the tenant the entire deposit back, unless you spent some of it on repairs. If you do not provide an accounting, she can sue you for the entire amount, and the judge can award her three times damages of the Entire Amount, not just what you didn't give back. (@Michael Noto says two times damages in CT, so I defer to him on this one.)
2. You are NOT ALLOWED to charge for your time, which makes it less desirable to DIY the repairs.
3. Everything has a depreciation schedule and a useful lifetime. Carpet is 4 years, so if it was 2 years old when she moved in, and she lived there for 2 years, you can charge her $0 for replacement.
4. If they fail to provide a forwarding address, you send everything to the last known address (your unit) and when it arrives in the mail, you keep the entire thing UNOPENED in their tenant folder to provide proof that you TRIED to deliver it.
You don't know what you don't know, @Cameron Riley , and we're here to help you learn the easy way. Please listen to @Joe Splitrock who does this all day every day. He's not trying to make your life miserable, he's actually trying to help you out.
@Ben Smalley mentioned a Move-in Move-out sheet. If you don't have one of those, how can you prove any of this damage didn't exist when they moved in? Not sure of your state specifically, but some states do not allow any deduction without a Move-in Move-out sheet.
[email protected]Podcast Guest on Show #261
4 Reply
Joe SplitrockPro Member
Moderator
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
7y
@Mindy Jensen great summarized list. I agree the move-in / move-out checklist is so critical. I also take photos and video of the property. Most of my security deposit disputes are the tenant claiming, "it was like that when we moved in". The checklist and photos are how you prove otherwise. Carpet is by far the largest issue I have faced. Second is holes in doors or walls. I find that strange because in my 25 year adult life, I have never intentionally or accidentally punched a hole in any door or wall.
Also speaking to point 2 about charging for time, you are best to hire everything done. That gives you receipt to prove the expense. It is harder for a tenant to dispute if you have receipts backing up every deduction.
2 Reply
Mindy JensenPro Member
BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
7y
Originally posted by :

Most of my security deposit disputes are the tenant claiming, "it was like that when we moved in".
I'm guessing 100% of security deposit disputes sound something like this...
[email protected]Podcast Guest on Show #261
0 Reply
LuAnn Leighton
Baltimore, MD · Member since 2019 · 80 posts · 47 votes
7y
Thank you for sharing.
0 Reply
Cameron Riley
OP
Rental Property Investor · Phila, PA · Member since 2018 · 554 posts · 118 votes
7y
@Mindy Jensen
Oh of course, I don’t take any offense
I love hearing/reading all the comments
Thank you for going in depth
0 Reply
Cameron Riley
OP
Rental Property Investor · Phila, PA · Member since 2018 · 554 posts · 118 votes
7y
@Michael Noto
Yes, PA has this same type of writing in the laws. This is very useful
My question, have you EVER actually paid interest to them from a security deposit? I’ve never heard of that, but I know the “ law “
Technically states all landlords should
0 Reply
Michael Noto
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
7y
@Cameron Riley Yes. Of course we pay interest to them upon returning their deposit. It’s the law. It’s never a significant amount of money anyway so definitely not worth dodging.
Your state should have calculators on how to figure out how much interest is owed.
1 Reply
Cameron Riley
OP
Rental Property Investor · Phila, PA · Member since 2018 · 554 posts · 118 votes
7y
@Michael Noto
Do you work mostly with class A properties?
Also, Where are you keeping there deposits? In an escrow account at the local bank?
0 Reply
Ned J.Pro Member
Investor · Manteca, CA · Member since 2017 · 1k+ posts · 2k+ votes
7y
You can not charge full replacement cost for carpet. Carpets have a finite life and will deteriorate no matter who lives there. Just because one tenant was in there when the carpet finally "died" doesn't mean they foot the whole bill. If they accelerated the demise of the carpet above normal and reasonable "average wear and tear" then you can charge them for the average remaining life of the carpet. Most courts consider the average life of carpet to be in the 10 year range
By far the most common fights over deposits are the "it was that way when I moved in" and landlords trying to get tenants to pay for items that have a finite life but the landlord tries to get the tenant to pay full replacement cost for the item.
0 Reply
Michael Noto
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
7y
@Cameron Riley Class B and C. No properties that I would consider class A. Deposits are kept in interest bearing accounts.
0 Reply
BOB CRANEY
HIGHLAND, MD · Member since 2011 · 160 posts · 141 votes
7y
@Cameron Riley
Your sweat equity has a value that you would be paying to a contractor if you didn’t do it yourself. You need to supply a detailed breakdown of how the security deposit was used to fixed up the place after tenant moved out. Give yourself and hourly rate and break down each item with a labor and material cost. I recommend an hourly rate from $35-50 an hour. I use $50 hr when I bill things back. As an example my turnovers always include replacing damaged window blinds.
I charge 15min per blind labor and the actual cost of the blind $8-12.
Don’t cut yourself short, it takes time to evaluate the turnover repairs, pickup all materials and install the materials before you can move a new tenant in. When you have such a detailed breakdown and are called into court, no judge argues that it’s not fair to the tenant if you have been reasonable. Just make sure you aren’t trying to bill for normal wear and tear items. Having a list of items and the basics of what you charge at move out will help tenants understand it will be in their best interest to leave you rental in good shape when they move out.
0 Reply
Cameron Riley
OP
Rental Property Investor · Phila, PA · Member since 2018 · 554 posts · 118 votes
7y
@BOB CRANEY
Exactly! Someone ruins my property in multiple ways, why in God’s name would I suffer from that and give them the deposit back
Loved this response! Thanks
0 Reply
Josh C.Pro Member
Property Manager · Indianapolis, IN · Member since 2010 · 1k+ posts · 1k+ votes
7y
@PJ McLaughlin
I see your point, but as a property manager I can 100% back up what at @Joe Splitrock said. Courts will give you $0 for ten year old carpet. A client of ours here in Indianapolis was once awarded $75 for 5 year old carpet. It has a life span. That’s why it’s expensive upfront, but LVP or refinishing the hardwoods are the way to go. I personally never would put carpet in anything but a bedroom. Preferably not even then.
I’d recommend prorating the carpet based on age. As mentioned above. Also, I’d recommend returning the security deposit as soon as you have looked over everything. Nothing upsets tenants more than you holding their money for no reason. If you know in 6 days, return in 10 days. Then they are less likely to complain what you kept.
Good luck
1 Reply
Irina Belkofer
Real Estate Broker · Cleveland, OH · Member since 2017 · 719 posts · 658 votes
7y
Ohio Revised Code:
(A) Any security deposit in excess of fifty dollars or one month's periodic rent, whichever is greater, shall bear interest on the excess at the rate of five per cent per annum if the tenant remains in possession of the premises for six months or more, and shall be computed and paid annually by the landlord to the tenant.
(B) Upon termination of the rental agreement any property or money held by the landlord as a security deposit may be applied to the payment of past due rent and to the payment of the amount of damages that the landlord has suffered by reason of the tenant's noncompliance with section 5321.05 of the Revised Code or the rental agreement. Any deduction from the security deposit shall be itemized and identified by the landlord in a written notice delivered to the tenant together with the amount due, within thirty days after termination of the rental agreement and delivery of possession. The tenant shall provide the landlord in writing with a forwarding address or new address to which the written notice and amount due from the landlord may be sent. If the tenant fails to provide the landlord with the forwarding or new address as required, the tenant shall not be entitled to damages or attorneys fees under division (C) of this section.
(C) If the landlord fails to comply with division (B) of this section, the tenant may recover the property and money due him, together with damages in an amount equal to the amount wrongfully withheld, and reasonable attorneys fees
You don't pay any interest (in Ohio) on security deposit less than one month rent.
If it's security deposit equal two months rent, you have to account them separately and pay interest.
With PM company, the security deposit is held in a special escrow account. If it's held by landlord, PM has it in writing that the landlord is responsible.
Not every state required to pay %%
1 Reply
Dion McNeeleyPro Member
Rental Property Investor · Port Orchard, WA · Member since 2018 · 116 posts · 123 votes
7y
@Cameron Riley
Almost every response is spot on.
You may also want to check with your states regulations. Some states require deposits be kept in an interest bearing account.
Podcast Guest on Show Financial Freedom in 10 Years and $200K Cash Flow with a Small Portfolio
1 Reply
James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
7y
Originally posted by @Dion McNeeley:

@Cameron Riley
Almost every response is spot on.
You may also want to check with your states regulations. Some states require deposits be kept in an interest bearing account.
I assume you meant to type "non" interest bearing account, which is so solid advice. To piggy pack onto that comment Ohio for instance requires landlords to pay tenants interest on their security deposit if they collect an amount greater than 1 months rent....Go figure.
0 Reply
Cameron Riley
OP
Rental Property Investor · Phila, PA · Member since 2018 · 554 posts · 118 votes
7y
@James Wise
So are you in agreeing with Non Interest or interest?
0 Reply
Kyle McKnett
Real Estate Agent · West Chester, PA · Member since 2018 · 63 posts · 46 votes
7y
@James Wise Pretty sure he meant interest bearing account. In Pa it is required that landlords keep security deposits in an interest bearing account. They are required to pay this interest back to the tenants but are allowed to use the interest to pay any bank related fees.
1 Reply
Cameron Riley
OP
Rental Property Investor · Phila, PA · Member since 2018 · 554 posts · 118 votes
7y
@Irina Belkofer
How many times have you paid this out to tenants?
0 Reply
Rick Imby
Member since 2019 · 60 posts · 28 votes
7y
You can always charge a tenant to clean a carpet even if it is 10 years old and you cannot get any money for them destroying the carpet. If you did not take pictures and have an agreement when they moved in you will probably be required to give them the whole deposit back. You need to get a handle on it and realize that the deposit is their money, not yours. Get in, clean it up, and get it rerented. Fighting over a deposit return is often not worth the time in Montana as the laws are written solidly in favor of the tenants.
1 Reply
Rick Imby
Member since 2019 · 60 posts · 28 votes
7y
Joe Splitrock and Mindy have given you great advice... follow it.
1 Reply
Irina Belkofer
Real Estate Broker · Cleveland, OH · Member since 2017 · 719 posts · 658 votes
7y
Originally posted by @Cameron Riley:

@Irina Belkofer
How many times have you paid this out to tenants?
Never.
If I take another month worth of money - it's last month Rent. The landlord has to pay taxes on it at the year it was received, however, no separate accounts.
My bank had trouble to create not interest bearing escrow account as it required by Division of RE, and I'm not getting in trouble to keep any money separately if any landlord choose to collect two security deposits.
You have to google your state's law though. As we can see, every state is different.
0 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.