Check out Part I and Part II of our security deposit series before reading this post and I promise you it will make more sense. The last aspect of security deposits left to discuss is when as a landlord you have a right to keep all or some of your tenants security deposit. Just like any aspect of rental real estate there are local guidelines and laws that govern this…

There Has to be a Legal Reason for Keeping a Deposit

Hopefully this goes without saying, but you can’t just keep a tenants deposit because you feel like it. There has to be a legal reason you are doing so. The most common reasons you would keep a portion or all of a tenants security deposit is if they violated the terms of their lease. The most common violations would be non-payment of rent or “excessive wear and tear”. Both are legitimate deductions because both are outlined in your lease.

Document Everything

So you have come to the conclusion that based on some “excessive wear and tear” caused by the tenant it is going to cost you $400 to get the issue repaired by your handyman. So their security deposit deduction is $400. Their total security deposit was let’s say $750. When you send them back the difference, $350, you will need to include an itemized invoice with a written explanation as to what the $400 in deductions was for. Include this documentation right in the same envelope as their deposit check and send it certified mail to the forwarding address they provided. This way you also have documented proof that the envelope was delivered.

Double check Your Local Laws

As we have stressed multiple times in this three part series check your local laws! What we discussed will give you a road map on how to handle security deposits, but fill in the gaps by understanding how your local landlord/tenant laws treat this aspect of owning rental property.