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Top Reasons Not to Return a Tenant's Security Deposit

October 02, 2018

It’s probably no surprise that security deposits can cause friction between landlords and prior tenants. Those deposits are a chunk of change, usually equaling one to two months’ worth of rent. No renter wants to lose that! On the other hand, landlords don’t want to keep deposits when it means they have to deal with the messy situations that merit a no-refund. So what are some of the top reasons landlords might legally keep part or all of a security deposit? It varies from state to state, so be sure to check local laws.
TenantCloud Tips for Landlords

Here are some of the most common reasons:

Damaged Property

While landlords can’t keep security deposits for regular wear and tear on a property, they can keep it for damages, or unauthorized changes. So what’s the difference between damage and average wear and tear? This line can be murky, so here are some examples that illustrate the differences:
 

Normal wear and tear

  • Small nail-sized wall holes to hang pictures

  • Small carpet stains

  • Minor dents, scuffs, scratches, nicks, tarnish, or clouding on mirrors, windows, blinds, cabinetry, tiles, shelving, countertops, outlet covers, screens, hardware, or doors

  • Cracks in walls or ceilings from settling; peeling paint; or fading flooring, curtains, or paint colors due to sunlight

  • Minor mildew, stained grout, or dusty fans or blinds

Damage/unauthorized changes

  • Several large holes in walls, excessive amounts of small holes, or large wall scratches from hanging frames

  • Excessive carpet stains, ripped up carpet, or carpets embedded with pet soil

  • Broken, burned, or cracked mirrors, windows, blinds, cabinetry, tiles, shelving, countertops, outlet covers, screens, hardware, or doors

  • Large scratches, gouging, or chips in flooring; tenant-caused water damage to flooring; unauthorized paint colors; markings on walls; or changes to property features

  • Black mold and/or excessive amounts of dirt from lack of cleaning

 

Missing Property

If property is missing from your unit after move-out, you can deduct the cost of those missing items from the security deposit. Maybe due to the haze and speed of moving, your tenants thought the microwave was theirs and took it with them, or they forgot to return the house keys, garage door openers, or other access items. More egregiously, if your tenants uninstalled nice fixtures you had in the apartment or blatantly took things that clearly weren’t theirs for the taking, you can and should deduct the cost of these items from their deposits.

Tip: To verify your claims, keep a record of what was in the unit before you rented it. One way to do this is by taking pictures or video of a unit right before tenants move in.

 

Abandoned Items

To be reasonable, you probably wouldn’t take money out of a security deposit if tenants forgot a couple of small items or a bag of trash in the unit when the rest of the place looks great. If, however, they left furniture, lots of trash around the unit, and other belongings that you are now responsible to clean up, you can deduct the cost of cleanup from their security deposits.

Tip: If you hire a company to clean out a unit or pay for other services, like extermination, be sure to track all tenant-related expenses so you can explain what you deducted out of their security deposits and why. You can even make this whole processes easier by tracking these expenses through a service like TenantCloud.

 

Unpaid Rent or Utilities

If tenants move out early, they are still legally responsible to pay the remaining rent through the end of their lease—and utilities if they are responsible for them; however, in many states, landlords are required to make a reasonable, timely effort to re-rent these recently vacated units. If they successfully fill the unit before the expiration of the prior tenants’ lease, landlords can only keep money from the security deposit that covers the cost of the unit while it was empty. This means that once the unit is filled and they are receiving rent from another source, landlords cannot deduct additional money from prior tenants’ security deposits. This would be receiving double rent, which is illegal.
 

These are just some of the many potential reasons why you may need to keep part of or all of a security deposit. Be sure to check your local laws to understand the full scope of your rights.

If you have any thoughts or pieces of advice on this topic, leave a comment below. We’d love to hear your insights!