New Ways to Handle Security Deposits

New Ways to Handle Security Deposits

Posted on 02. May, 2012 by in Business

One of the most contentious aspects for both property managers and tenants is the handling of a security deposit. Designed as a way to protect property managers and owners against possible damages, security deposits are not designed to be used as last month’s rent, and the majority of rental leases state that up front. What continually causes problems are the way that security deposits are handled upon a tenant’s move-out. While laws vary from state to state, the majority state that a property manager must provide their former tenant with either their security deposit returned in full, or an accompanying statement if a portion or all is used to compensate the management company for damages incurred.

The problem occurs when management companies simply decide to keep a portion (or all) of a deposit without any explanation. This happens more frequently than you would expect, and many individuals that did damage the unit in some way have been awarded their full deposit back after taking management companies to court over that lack of statement. While to some managers, the damages may seem obvious, a statement explaining what the security deposit was used for is required. A statement saying ‘repaired damages’ is not sufficient. All of this can be avoided by taking a few extra precautions that are designed to protect your property and your tenant’s rights.

Consider the following:

  • Do a walk through with the tenant prior to moving them in. It’s not enough to walk through the empty unit alone, taking notes. If there’s a crack in the window, you’ll both notice it, and the tenant will not be held responsible for it.
  • Take a lot of pictures and make sure that the camera dates them. It’s not sufficient to write a date on the back. Anyone can backdate a photo, but you can’t change the camera date. Encourage your tenants to do the same.
  • Do a preliminary walk through upon move-out. This will allow tenants to fix any issues that come up, and will eliminate costly litigation later.
  • Always itemize your security deposit statements. If a full deposit is being returned, it’s not necessary, but if there are any charges, be sure to provide a full explanation of those charges, and the proof to back them up.
  • Remember that you cannot charge tenants for normal wear and tear, only damages above and beyond that.

While there will always be some disagreements about security deposits, involving your tenant more in the move-in and move-out process will make your life much easier in the short term, and help you avoid costly legal fees in the future.

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