Tips for Landlords to Get Security Deposit Money Owed

Protecting Your Right to Take Deductions

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If a tenant does not pay rent or damages the rental, the landlord may be able to deduct the money owed from the tenant’s security deposit. Even if you are rightfully owed this money, if you do not follow the security deposit laws in your state, you may be forced to return the amount, or even more, to the tenant. Here are some tips to help you make sure you receive the money you are owed.

Know Your State Limit

Many states set a limit on how much you can collect from a tenant as a security deposit. If you collect too much, you are breaking your state's landlord-tenant law.

Include Security Deposit Clause in Your Lease

The basic rules of security deposits at your property should be an included clause in your lease agreement. Essential things to include:

For example:

  • It will be placed in a separate interest-bearing bank account
  • The name of the bank
  • The address of the bank
  • The interest rate

Reasons deductions can be taken from the tenant’s security deposit, such as damage in excess of normal wear and tear and nonpayment of rent. Legal reasons you may be allowed to keep a tenant’s deposit will vary based on the state, county, and city where your rental property is located so be familiar with your local laws.

Security deposit laws differ by state, so under the rules that apply under your state's landlord tenant law.

Take Pictures of the Property Before the Tenant Move In

Pictures will serve as visual proof of the condition the property was in before the tenant moved in. You can include these pictures as part of the tenant's move-in checklist.

Have a Move-In Walk-Through With Tenant

At move-in, you should walk through the rental with the tenant to access the condition of the property. Your move-in checklist should include the items in the apartment and their condition. Some examples would be:

  • Stove in working order
  • All outlet covers in place
  • All windows lock
  • Screens on all windows
  • Refrigerator in working order
  • Freezer in working order
  • Two smoke detectors
  • Two carbon monoxide detectors
  • Smoke detectors in working order
  • Carbon monoxide detectors in working order

The tenant should then sign and date the bottom of the move-in checklist to acknowledge that they agree that the property is in good, habitable condition. If there are any known defects, such as a large scratch in the hardwood floor in the living room, they should be noted here.

Provide Security Deposit Receipt

Certain states require landlords to provide the tenant with written notice after receiving the tenant's security deposit. This must usually be done within 14 to 30 days of move-in.

The receipt must include:

  • Amount of security deposit
  • The name of the bank
  • The address of the bank
  • The interest rate (if applicable in your state).

In addition, certain states require landlords to notify the tenant of the annual interest accumulated on their security deposit. Check your state laws.

Give Tenant List of Move Out Procedures Prior to Move Out

For example, they should remove all trash, leave the property broom swept clean and should return the keys to you, the property manager or the building superintendent.

Perform Walk-Through Inspection With Tenant

Prior to move out, walk through the property with the tenant to document any possible damage or other reasons for security deposit deductions. You can also take pictures during this inspection.

Return Deposit After Move Out

You are required to return the security deposit amount to the tenant within "X" days of tenant move out. This amount of time will differ by state law, but is often 30 days.

If you have kept any or the entire security deposit, you must give an itemized list of expenses explaining why you have kept the money. If the tenant has not provided you with a forwarding address within 30 days of move-out, you may not be legally obligated to return the security deposit.

Tenant Does Have Right to Contest Any Money You Have Kept

The tenant can file a claim in small claims court to try and recover the money. If you have not followed the laws of your state, county, or city exactly, they may be able to take back the security deposit, even if you were otherwise entitled to keep it. For example, in some states, if you did not notify a tenant in writing of the bank name, address, and interest rate at which their security deposit was held, you may not be allowed to keep any money owed to you.