If you ask any landlord they will tell you that one of the most contentious issues that they have to deal with are security deposits. It’s not hard to see why because some security deposits can come to thousands of dollars and it’s not uncommon for some renters to think that they are entitled to have every dollar of their security deposit back once they’ve moved out.
Security Deposits Are 100% Refundable
The first thing a homeowner needs to know when preparing a property for the rental market is that a security deposit is 100 percent refundable to the tenant when the home is left in the same condition that it was received. You have to be prepared to return that entire security deposit to your renter; it’s not your money.
In today’s marketplace, collecting the equivalent of one month’s rent for a security deposit seems to be the standard. That is typical, but you have the right to charge a bit more if you need to. For example, during the course of your tenant screening you might come upon an applicant who has poor credit or a rental history that causes some concern. In those cases, it’s acceptable to charge more than the standard one month’s rental amount as a security deposit.
As a property owner, you are not required to open up a separate or special bank account to hold your tenant’s security deposit. However, property management companies are required to have a separate account for security deposits. Those tenants’ funds cannot mingle with the regular business accounts of the company.
Something else you need to know about security deposits is that it’s perfectly acceptable to charge a pet deposit. When a tenant is moving in with a dog or a cat, you can charge an extra deposit in addition to your security deposit. However, you cannot charge any sort of pet deposit when a tenant is using a service animal in the home.
It’s important to pay attention to deadlines when it comes to returning the security deposit to the tenant. After the tenant moves out, you have 31 days to return the security deposit to your tenant. That includes mailing time consideration. If a property owner fails to return the security deposit or illegally withholds any part of that deposit, the tenant can sue to recover twice the amount of the security deposit that was paid.
Anticipate Security Deposit Problems Before They Occur
One of the best things any owner can do is anticipate security problems BEFORE they occur, rather than later because failure to plan for or anticipate problems is why many owners experience burn out when it comes to owning rental properties.
The following are common questions that most owners have regarding security deposits:
Do property managers need to give tenants a written statement of condition?
Whether your state requires it or not, it’s a good idea for property managers to give their tenants a written statement about the condition of the property when they move in. (Be sure that both you and your tenant sign the statement.) This way, there will be no question about whether or not that hole in the wall was there before the tenant moved in.
Can you deduct damages from the security deposit? What about unpaid rent?
When a tenant moves out, do a final walk-through of the property together, noting any damage. It’s a good idea to bring along a digital camera so that you can justify any deductions in case there’s a dispute. You can do this before the lease ends to give them a chance to fix any issues themselves. Property managers have the right to deduct from the security deposit for any new damage that they find. You can’t deduct for “normal wear and tear,” so be sure to develop an understanding of what this includes. Depending on where you live, property managers may be able to deduct for unpaid rent as well; again, check the laws in your state to be sure.
How quickly do property managers need to refund a security deposit once a tenant moves out?
Whether or not a property manager deducts for damage, many states have rules about the allotted time frame for refunding security deposits. For example, in Massachusetts, property managers must refund security deposits or provide tenants with a detailed list of damages and the cost of repairs within 30 days. If a landlord fails to do this, he loses his right to deduct anything from the security deposit—no matter how much damage the tenant caused.
Avoid Security Deposit Problems With Property Management
To avoid security deposit problems get Portland Oregon Property Management today by calling us at (503) 515-3170 or click here to connect with us online.