How to Use the Disposition of Deposit as a Landlord [With Sample Form!]

by | BiggerPockets.com

The Disposition of Deposit form is a one-page document that spells out in detail what happens to the vacating tenant’s security deposit, including an assessment of charges being held against their deposit. Preparing the Disposition of Deposit is one of the final tasks a landlord must do for their former tenant after they have vacated. Of course, our favorite Dispositions of Deposit to complete are the ones where the tenant gets an entire refund back minus the cost of mandatory carpet cleaning. Those are usually also the tenants who paid their rent on time, took care of their unit, didn’t cause unnecessary problems or hassles, and who will receive a great reference when a rental reference is requested.

Whether your tenant has any security deposit deductions or not, you as the landlord are required to send the tenant a statement itemizing the exact refund or balance owed, which is where the Disposition of Deposit comes in. The landlord is required to send the tenant the Disposition of Deposit and corresponding refund (if they get one) within a certain amount of time, which varies from state to state, so be sure to become familiar with the specific law in your jurisdiction. In Washington State, the penalty for the landlord who doesn’t send the Disposition of Deposit within 14 days after the tenant has vacated is harsh. The courts can order the landlord to repay double the amount what the original deposit was for, EVEN if the tenant owed a balance. Here’s a quick example.

Real Life Example

Linda purchased her first single-family rental house a couple of towns over last year. Her first tenants just moved out after only 12 months of occupancy. After they moved, she drove over to the property to take a look around and noticed the tenants didn’t clean anything, and there were some damages as well that she didn’t remember and that were also not listed on the Move-in Condition Report. Linda was disappointed the previous tenants were so negligent in caring for the home, and she was definitely not prepared for the $600 of her own money she had to put into the house to go towards the cleaning bill and damages, in addition to the tenants’ deposit of $750.

She got it done, though, and three weeks later found a new tenant and moved on. At one point about a month after the former tenants moved, they called her to find out where their deposit was. Linda informed them that she used it towards the damages they left behind. They denied responsibility and demanded she return their full deposit to them immediately, or she would see them in court. Linda wasn’t worried since she had her Move-in Condition Report and pictures of the damages they caused. She decided to call their bluff.

Some time later Linda finds herself in court because the former tenants claimed she stole their deposit. Linda explains to the judge that she didn’t “steal” it and had used the tenants’ deposit only towards the tenants’ damages and cleaning up their grime. The judge awards the former tenants $1,500 anyway because Linda didn’t realize she had to send the tenants a statement detailing the deductions within 14 days.

Ouch. Ignorance is not bliss, folks. It can hurt—a lot.

The Disposition of Deposit Form

The actual Disposition of Deposit doesn’t need to be anything fancy and can be as simple as a one-page form, like the one we use, shown below.

If your tenant will not be receiving their whole deposit back, always include pictures, bids, receipts, and copies of their lease stating their responsibility for the charges. We always highlight the areas of their lease we want to draw their attention to as well. The point is to include as much information as possible to support the deductions to reduce the likelihood of a dispute that ends up in a time-consuming, stressful confrontation at best—and a visit to the courthouse at worst. Basically, you’re showing the tenant what you would be showing the judge, which, if you’ve covered all your bases, should be enough to silence any challenges that would have been forthcoming.

Your Disposition of Deposit should include the date, the tenant’s name, the address of the rental, the tenant’s current (forwarding) address, followed by an itemization of all credits and debits involving the rental and the security deposit.

As you can see on our Disposition of Deposit, we begin with the tenant’s credits, the total amount of money we have held in trust as their deposit. According to the tenant’s lease, we record how much the tenant paid in the following areas:

  • Security Deposit
  • Other Rent
  • Pet Deposit/Key Deposit
  • Other Deposits

After the credits, we break down the deductions in these categories, leaving extra space below for additional details, if needed. Remember, be as specific as possible in your details, and if you need more room, just include additional pages:

  • Non-Refundable Fees
  • Rent for Period___________ Through ___________
  • Unpaid Utilities
  • Lock Change
  • Late Fees, NSF, Legal Services
  • Carpet Cleaning
  • Cleaning
  • Damages
  • Other

Finally, total it all up, subtract out the debits from the credits, and you’ll arrive at your final number. At this point, either you owe your tenants or they owe you. Whichever it is, make it clear on the Disposition of Deposit and mail it within your state specific allotted timeframe to your tenant’s forwarding address or their last known address if you were unable to obtain their new address. If you really want to cover all your bases—and this next tip is required in some states—when you send the Disposition of Deposit, mail it via Certified Mail or for a slightly cheaper option, request a Certificate of Mailing.

Establishing Evidence of Mailing

The purpose of either Certified Mail or Certificate of Mailing for the landlord is simple: evidence of mailing. For Certified Mail, the envelope is affixed with a “Certified” label with a unique serial number, a duplicate of which the post office will postmark and give to the purchaser. The serial number is then tracked by the post office to provide proof of where, when, or even if the letter was delivered. This comes in handy for the landlord if their tenant denies receiving the mailing or claims the landlord didn’t meet their state requirements to issue a deposit statement and corresponding refund within the allotted timeframe.

With a Certificate of Mailing, you are only given a validated receipt of the time and date of the mailing—not proof of delivery. When we mail our deposit statements to our vacated tenants, we use the Certificate of Mailing. It gives the postmark evidence we want and shows we met the requirement in Washington State to mail the Disposition of Deposit to the tenant within 14 days after they have vacated. For the record, we have never needed the evidence of mailing, but as a landlord, it never hurts to be prepared.

At some point, you may find more deductions against the security deposit that you should have charged to the tenant after you have already sent back their Disposition of Deposit and refund. If you send your tenant a new bill for those additional items, they may argue that because they weren’t listed on their final Disposition of Deposit, they cannot be held accountable for the charges. To help combat this, you may want to add a small clause at the bottom of your Disposition of Deposit form that says, “The final credit or debit listed on this Disposition of Deposit does not waive the landlord’s right to pursue additional claims should they become apparent.”

[This article is an excerpt from The Book on Managing Rental Properties.]

What does your Disposition of Deposit for look like? Any questions or comments on this topic?

Leave them below!

About Author

Brandon Turner

Brandon Turner (G+ | Twitter) spends a lot of time on BiggerPockets.com. Like... seriously... a lot. Oh, and he is also an active real estate investor, entrepreneur, traveler, third-person speaker, husband, and author of "The Book on Investing in Real Estate with No (and Low) Money Down", and "The Book on Rental Property Investing" which you should probably read if you want to do more deals.

14 Comments

  1. Jerry Rien

    Thanks for a nice easy to read blog that didn’t come in 3 parts, or needs to be read between the lines. Really I have always liked to read your blogs of listen too the podcasts, you explain concepts in an easy to understand explanation. Thank you.

  2. Lana Lee

    Our tenants just broke the lease 5 month earlier without proper 60 days notice, we don’t feel like charging them $2000 fee as indicated in a lease, because one of the tenant is very ill with cancer and I know they simply don’t have the money, but do you think it’s appropriate to withhold their security deposit to cover the unexpected period of unit turn over? And if so how do you put it in the Deposit Deposition form.

    • Jessie Huffey

      I had a similar situation when my two tenents broke of their engagement and vacated the lease early. I told them I would return their security deposit and not hold them to the remainder of the lease term if I was able to re-rent the property to suitable tenants within the next 30 days. Unfortunately, because it was the middle of winter this did not happen and I informed them that I had to keep the deposit because of my loss of rent income that was a result of them leaving the lease early.

        • Walter G.

          My current tenant is the result of the last one having to break the lease and not wanting to lose their deposit. The couple leaving actually sourced the new tenant for me. She cleared the standard financial and background checks so I wrote her lease right away and the unit never went a day unrented. I covered the HOA lease change fee because it was a lot cheaper than it sitting empty for a couple of weeks. Plus I didn’t have to advertise and show it.
          Then with the leaver’s written permission, I wrote the lease to allow the new woman a week up front for move in, gratis. I was quite happy to return the first deposit the moment I received the second one. It worked out for everyone.

  3. Jessie Huffey

    The only tip i would add to this article is that i find it helpful to email the disposition along with corresponding pictures to the former tenant, letting them know the remaining funds and copy of the disposition will be sent to the forwarding address they provided, that also creates an additional paper trail to protect the landlord.

  4. Curtis Bidwell

    Brandon, This definitely a good reminder of our responsibility and a practical way to handle it. I’m sure you’ve seen the updates to Washington law since the book came out, but for other Washington Landlord’s who aren’t familiar with it, we now have 21 days (not 14) to give a refund/accounting of deposits!

    “RCW 59.18.280(1) Within twenty-one days after the termination of the rental agreement and vacation of the premises … the landlord shall give a full and specific statement of the basis for retaining any of the deposit together with the payment of any refund due the tenant…”

  5. Zackary Nelson

    Wow, thanks for the tip, Brandon. After reading this, I realize I got off lucky with tenants in the past…. I could have been taken to court for keeping a deposit without a form like this! I’ll definitely be saving your example form for next time I need to dip into a tenant’s security deposit.

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