Withholding A Tenant’s Security Deposit

As a landlord, you have power over your tenants so long as you don’t abuse said power and everything you do is still legal. However, you might have a few questions regarding security deposits and if you should deduct or withhold all of it. So long as they follow the terms of their lease, you should always return their security deposit once it has expired. But if you incurred some expenses during their stay on your property, then you should know about the certain situations when a landlord can legally keep a portion or all of the tenant’s deposit.

When is it acceptable for a landlord to keep the security deposit?

States have different laws about keeping a tenant’s security deposit. It’s quite tricky to determine if the deduction you’re going to do is legal or not, so make sure you check the property laws or the state, county, and city where you’re operating before you pocket that deposit.¬†However, if your tenant commits one of the following offenses, then there’s a good chance that you can keep that money to yourself.

If your tenant terminates their lease early

As a landlord, you can keep all or a portion of their security deposit if they terminate their lease early. The reason for this is because you have to cover the money they’ll be costing you because they breached the contract. So you have to make sure that you include an early termination clause in your lease or else your tenant won’t have the obligation to abide by this rule.

If you chose to take the matter to court, you can charge your tenant with attorney fees and other necessary expenses.

If you tenant didn’t pay the rent

Most states allow a landlord to keep the security deposit when a tenant refuses to pay their rent. Non-payment of monthly rent is considered to be an automatic breach of the lease. As a landlord, you have no other choice because it’s the only way to cover the lost rent.

If they damaged your property

One of the most common reasons why tenants have conflicts (click here to read more reasons why) with their landlords is because of property damage. Fingers will be pointed, deductions will be made to the deposit, and relationships will be ruined. As a landlord, you should know how to determine the difference between normal wear and tear and deliberate damage to your property. Here are a few examples:

Normal wear and tear

  • Mildew in the bathroom tiles
  • Small carpet stains
  • Dirty grout lines within the tiles in the property
  • Tarnishing on metallic fixtures
  • Nail holes on the wall from hanging frames
  • Loose handles or hinges on doors or cabinets

Deliberate damage

  • Multiple or huge holes on the walls
  • Extensive water damage on wooden floors
  • Outlet covers are missing
  • Smoke or carbon monoxide detectors are damaged or missing
  • Cracked countertops
  • Huge stains/holes on the carpet
  • Broken windows and doors
  • Unreturned keys by the end of the tenant’s lease

To cover for cleaning costs

Usually, a landlord isn’t allowed to dip his hands into the security deposit if it’s going to be used for the clean-up of normal wear and tear. You’re expected to clean the unit before your next tenant officially moves in. If the past tenant left extensive damage to the property, then you can definitely keep their money.

Let’s have an example, shall we? If you tenant finally moves out and left a bag of garbage waiting for you outside the door of the unit, you don’t have enough reason to justify a deduction from their security deposit because of the “labor” you’re going to do by throwing it away. However, if they decided to leave their trash all over the apartment, with some of their belongings still left inside the cabinets, then, of course, you can keep a portion of their security deposit. If you allow pets on your property, you can charge a tenant if they let their pet use the carpet as a toilet– but remember to just deduct enough to cover the costs and don’t go over it.

Unpaid utility bills

This one can be quite tricky. If the bills are still under your or your property’s name, you can keep the deposit to cover the utilities that your tenant failed to pay. However, if it was under the tenant’s name, then it’s the responsibility of the utility companies to collect the payment.

Remember:

  • Always have an inventory checklist with the condition of the items included. Use this as a baseline for comparison between your tenant’s move-in and move-out day.
  • Have an itemized receipt of the deductions you’ve made ready. This should be handed over to the tenant along with the check to their remaining security deposit as proof that the deductions¬†were used properly. This can also help if they have any disputes about the deductions.
  • Take plenty of photos of the property before the tenant moves in and do the same thing once you’ve noticed the damages they’ve done. Websites such as MoveIn.Space can help you document these photos properly which makes it easier for you to pull them up as proof.
  • Know your state’s rules and timelines regarding the return of security deposits.

Have you ever had any experience as a landlord with keeping a tenant’s security deposit? Share your story in the comments below!