Landlord Blog

Education and news for smart DIY landlords!

Top Reasons Not to Return a Tenant's Security Deposit

The security deposit. It’s a hot topic for both landlords and tenants. As a landlord, you’re going to collect a security deposit from a tenant on top of the first month’s rent. Its purpose is to help cover damages, unpaid rent, and other unmet conditions stated on the lease agreement. You have the right to withhold or deduct money from the deposit. This blog post will specify scenarios and reasons to do it. Learn more by reading.

Scenario #1: Nonpayment of rent

If a tenant doesn’t pay the rent, he is basically breaking the lease. Know that you’re allowed to take all or a portion of the tenant’s security deposit to cover the lost rent.

Scenario #2: Excessive property damage

You should be able to differentiate between “normal wear and tear” and “excessive damage.” Normal wear and tear refers to the expected aging of a property. Examples are loose door handles, minor stains on the carpet, and dirty grout. Remember that you cannot make deductions for normal wear and tear.

However, property damage that results from an accident or unreasonable usage is a reason to keep the security deposit. Examples are broken windows, smashed mirror, holes in the wall, and water damage to wooden floors.

Scenario #3: Painting

Every few years, landlords repaint the walls of their rental to bring in new tenants. But what if your tenant painted a wall with a certain color he likes and did some “art” without your permission? In this scenario, you can deduct from the security deposit to cover the cost of bringing back the original color of the affected wall. 

Related: Renovation Tips for First-Time and DIY Landlords

Scenario #4: Abandonment

Did a tenant abandon the rental unit and left personal property behind? You can keep a month’s worth of rent if you’re actually dealing with a month-long vacancy. Be sure to return any overlapping funds.

Scenario #5: Cleaning

Just because you cleaned and disposed of a few items in the rental, doesn’t mean you can deduct from the security deposit. However, excessive filth is a different story. Grime-coated tubs, cigarette burns, and junk all over the place are reasons to use the deposit. 

The term “broom clean condition” on the lease could mean different things to tenants. One tenant may assume that he can simply sweep the rental yet leave a lot of garbage on the table. 

Read: How Do You Handle Dirty Tenants?

Scenario #6: Unpaid utility bills

Your tenants are legally obligated to pay their utilities as specified on the rental lease. Not only can you deduct, but you may also file a lawsuit to ensure that a tenant complies.

Final Thoughts

Remember that you must also document the expenses for the deductions. Provide tenants with itemized receipts. Take photos whenever applicable. Most importantly, check what your state says about security deposits. You must always have a legitimate reason for withholding the security deposit.

If you’re ready, make Landlord Prep your go-to resource for landlording education. Here, we offer a complete DIY landlording course to get you on the right track. Join our academy today. If you want, you can check out Flavia’s real estate investing webinar first!