Security deposits serve as safeguards for landlords, ensuring protection against potential damages caused by tenants. However, managing the deposit disposition process properly is crucial to ensure you can actually retain those funds.
Here are our tips on this process:
#1 Deposit Disposition Process Actually Starts at Move-In
When you grant tenant possession and charge a deposit, you must complete a thorough move-in inspection form detailing the condition of the property upon move-in. This document serves as the baseline, as without a fully executed inspection, you may not retain any deposit at all.
Read our tips on onboarding a tenant to learn more.
#2 What Landlords Can (and Can't) Charge Tenants at Move-Out
It's essential to understand the permissible deductions from a security deposit. Acceptable charges typically include property damage beyond normal wear and tear, unpaid rent or utilities, and necessary cleaning expenses to restore the property to its original condition. Conversely, landlords are prohibited from charging for normal wear and tear or damages that existed prior to the tenant's occupancy.
#3 Communicate Your Expectations Ahead of Time
Sending the tenant a friendly letter a few weeks before the move-out date, explaining what's expected of them at move-out, is a best practice.
See our blog post for tenants on this matter.
#4 How to Complete the Deposit Disposition Statement
Deposit disposition statements need to be clear, accurate, and backed up with proof. They must be completed in a timely manner - different jurisdictions have different rules about that, so ensure you are in compliance based on your property location.
Start by detailing the total amount of deposit the tenant originally paid. Detail any expenses you want to deduct from this deposit. If there's a balance left, write it up and attach a check for this amount. If the tenant owes anything after you've taken their deposit, make sure that amount is clearly stated on this form. Your contact info for any questions about this statement needs to be included as well.
#5 Resolving Disputes
In the event of disagreements regarding deposit deductions, be prepared to present compelling evidence for any charges you've levied against the tenant - such as before-and-after photographs and repair invoices.
If disputes persist, consider seeking resolution through mediation, which offers a neutral forum for both parties to negotiate and reach a mutually satisfactory outcome.
As always, communication is key. From the move-in meeting to the deposit disposition, open communication between tenants and landlords solves problems. Keasy is here to help with that!
