Moving Your Tenants Out: A Security Deposit Mistake to Avoid

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I just got a 30-day move out notice from some of my tenants in Baltimore, MD. They’ve been with me for over five years and I hate to see them go, but unfortunately I couldn’t get them to stay. So when I received their 30-day notice in the mail (as per requirements of my lease) I immediately emailed them to set up a date for the move-out inspection.

Now, this inspection is a few weeks away, however, I’m already getting prepared for their move out and for the moving in of new tenants. First off, in addition to having the tenant’s mail you a copy of their intent to move out, your lease should also contain a clause that says you’re allowed to start advertising the property as soon as the tenants let you know they’re moving.

This includes putting a sign in the front yard, and of course, the other methods I love to use such as running ads in the newspaper and placing ads on Craigslist. You should tell your tenants that you plan to show the property on Saturday’s from 2-4 (or whatever time you choose) and give them plenty of notice ahead of time. I’ve never had tenants have a problem with this, but if they did, I would again point to my lease and say that it says I get access to show the property.

As for the actual move out of the tenants, you should have a checklist for this.

I have checklists for everything in my real estate business. For moving in, for moving out, for doing a lease option deal, a wholesale, a sub-2, etc. The checklist covers items such as “remember to let the tenants know they must leave the house in broom-clean condition when they move out” to remembering to get all of the keys back, the garage door opener and any other items they may have.

On the inspection day, make sure the tenants are present. I’ve heard of landlords telling a tenant to go ahead and leave and they’ll get to the inspection another time and mail them a copy. This is obviously a terrible idea. You need to have the tenant there so that the two of you can walk through the house and fill out the inspection checklist. Also, it’s important to have the initial move-in inspection form with you.

That way, if you find a hole in the wall and the tenant says the hole was there when they moved in, you can show them the move in checklist from years ago that shows there was no hole. On the other hand, this works to protect them too, in case you try and blame something on them. You can look at the original checklist and say “you’re right, there was a stain on the carpet in the kids bedroom, I almost forgot about that.”

Here’s the one crucial mistake that I don’t want you to make…

Let’s say the inspection went fine and there were no problems with the house. Let’s say you got back the house keys, the garage door opener and everything looks in order. Whatever you do, do not give them back the security deposit at this time. Don’t even bring it with you so you aren’t tempted.

In almost every state you have 30-45 days to return a tenants security deposit. Use that time. You’d be very surprised at how often during that time frame you’ll discover problems with the house, or items that have been broken, that you didn’t realize on the initial move out.

If you foolishly give the tenants back their money on move-out day, only to discover that three days later they trashed your washer and dryer, well, good luck getting any money out of them. Also, even if the tenants beg you for their money immediately, simply tell them its company policy that you’re not allowed to issue funds on that day, but they will get their money within 45 days as state law requires.

Note: Here’s a sample move in/move out checklist.

Photo: Matt McNier

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.