The collection of security deposits and their eventual return, in whole or in part, has been the source of countless landlord-tenant disputes. However, there are ways that landlords can cover themselves and also reduce the chances of conflicts down the road. Here are five things landlords should know about security deposits:
1. Playing by the Rules
Every state has specific laws governing the collection of security deposits; for example, most do not allow the total to be more than two months of rent. Landlords typically have 21 to 45 days to return the security deposit minus any damages, but this timeframe can vary from state to state. Overall, repayment rules tend to favor tenants, and late repayment could result in having to pay the tenant triple the cost of the original security deposit in some states.
2. Interest on Security Deposits Go to Tenants
Security deposit money may also have to be deposited into a separate bank account from the landlord’s personal money; exact rules vary by state. Also, the tenant is entitled to interest monies accrued on any refunded security deposit at the current savings account rate; many landlords are surprised to learn this, and tenants are often not aware that they have this right.
3. Get it in Writing
Best practices for landlords require that both landlords and tenants formally agree to the condition of a unit before the tenant takes possession. Ideally, a formal walk-through with both the landlord or manager and the new tenant plus documentation of any existing issues with the unit should take place before move-in. The document should then be signed and dated by the tenant, with copies made and one given to the tenant for their records.
4. Capture it in Photos
Landlords should also take photos of the unit between tenants so that there is documentation of the actual condition it was in before a new tenant moved in. Most cell phones have a time/date function that can be switched on to ensure that the actual date the photo was taken can be verified in the event of a dispute later.
5. Screen First
While all of these steps can help to protect landlords from losing disputes over a security deposit down the road, one of the best ways to minimize headaches is by doing tenant screening during the application process. This can help to keep irresponsible tenants out of the property in the first place.
Security deposits have engendered more “he said, she said” arguments than perhaps any other landlord-tenant issue, but landlords can use these five tips to protect themselves throughout the process.