With all the work that has to be done when a tenant is moving out, trying to manage every detail can be challenging. Still, for Allen property owners, keeping records of those details is necessary, especially in relation to refunding a former renter’s security deposit. Mishandling the security deposit refund could lead to expensive and needless legal battles depending on where your rental property is located. Understanding the best practices for returning security deposits can aid you in meeting your obligations as a landlord while also making certain you prevent unwanted legal issues.
A security deposit is not income. The deposit is funds held for your tenant (simply put, it is their money). While the one who’s renting is still leasing your property, this deposit must not be spent or used. You need to have clear and specific language in your lease that explains the conditions in which all or part of the security deposit will or will not be refunded. The primary reasons to keep portions of a tenant’s security deposit include recovering past-due rent, damage to the property (above ordinary wear and tear), unpaid utilities, or removing abandoned personal items. How much you get to keep and for what reasons depends on local and state laws. Just ensure that you have a clear understanding of the regulations in your area.
Also, each state has a timeline with regards to returning security deposits to former renters. The timing varies according to the place but normally ranges from 14 to 60 days starting on the day the tenant gives over possession of the home. Failing to return a security deposit and any related documentation of amounts withheld by the required deadline may result in a number of consequences, including:
- losing the right to deduct any portion of the deposit for damages or unpaid rent
- facing a lawsuit in small claims court
- other monetary penalties allowed by local or state law (e.g., owner to pay 3 times the deposit)
When partially or fully refunding a security deposit, you need to include a statement detailing the refund and use a check for a clear paper trail. If you have withheld any portion of the deposit, you might also be required to send receipts listing the amounts withheld and the reason for each one. Creating and sending clear documentation is a landlord’s greatest defense against any allegations of mishandling a security deposit.
Understanding the ins and outs of returning a security deposit is an important component of successful Allen property management, but so is having the right people on your team. Real Property Management One Source can deal with all the details for you including streamlining your move-out process, security deposit refunds, and ensuring you and your property stay clear of legal trouble. If you want to find out more, contact us online or call us at 214-721-0727 today.