As a property manager or landlord, there has or will probably come a time when you’ll have to deal with a tenant who has not left your unit or property in the best shape. After a cringe-worthy move-out inspection, you’ll have to turn to the most immediate recourse you have for those damages: the security deposit. Before you start subtracting away, here’s what you need to know.
Make sure all your deductions qualify
Most states do allow you to use the security deposit money to get back the costs of damage beyond typical wear and tear and unpaid rent. However, some states let you do more. In Indiana, for example, a landlord can even recoup unpaid utility and sewer bills. In Iowa, a landlord can put security deposit money toward the expense of getting the unit back if the tenant is withholding it in what the law considers “bad faith.” In other states, the expenses you can deduct aren’t controlled by laws at all and are instead dictated by what was stated in the lease agreement.
Review the allowable deductions under your state’s laws to ensure you’re fully complying. Deducting for something you shouldn’t will expose you to liability and can cost you later.
Document every single thing
While not all states require you to walk through and inspect for damages before making a security deposit claim, do it anyway. If the tenant is still there, have them present at the move-out inspection if possible as this can help curb disputes. Take time-stamped photos of all the damage you find, and keep a detailed record of unpaid utility bills, rent and other expenses so you have proof.
Make an itemized deduction list
Create a list of the deductions from the deposit by item. Put it all in writing and note how the deposit will be used toward cleaning, repairs or other obligations required under the lease and as allowed by state law. Make sure to list each item and the corresponding dollar amount, such as “$25 to fix broken toilet handle.” Make sure you attach your receipts and invoices for all the repairs you made, and provide reasonable estimates for the work that has not yet been done.
Unfortunately, bad tenants do happen to good properties. By taking the proper steps with the security deposit from a bad tenant, you can at least recoup some of your losses without causing any more trouble in the future.
