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Handling Security Deposits in Property Management

Recent studies show that about 25% of the time property managers do not return the security deposit after the renter has vacated the apartment or rental unit. This is a serious issue, and it is mostly illegal in all states. Many times renters also do not receive any explanation about why their security deposit was not returned. In most cases property managers do not bother to provide explanations, since the unit is thoroughly trashed by the renter, and the reason for not returning the deposit is obvious.

A Waste of Time

Property managers will be occupied with the task of conducting extensive repairs and will have to get the unit ready before the arrival of the next renter. In such circumstances, property managers find it unnecessary and time consuming to provide any justification for not returning the safety deposit.

However, every state has specific rules regarding the handling of security deposits, and almost all say that property managers do have to give former tenants a detailed statement showing how the security deposit funds were used for repairing damages. Usually this statement has to be given to the tenant within a month of the date the unit was vacated.

What exactly was broken or damaged?

A brief note stating the cleaning or repair charges will not be sufficient legally. Property management must provide a detailed statement listing the damages and the repairs or replacement costs. To make the statement fool proof, it is also wise to include a copy of the walk-through that was done before the tenant moved in. This will show that these damages occurred only during the time the tenant was occupying the unit.

If property managers do not follow the norms regarding security deposits, it can lead to legal complications and disputes, where the security deposit may have to be returned to the tenant in spite of the damages caused by the tenant. To avoid such situations it is therefore necessary to do the following:

o    Before the tenant moves into the unit, complete a detailed walk-through, and based on that make a statement about the condition of the unit. Make the tenant sign this statement for showing their approval.
o    When the tenant is leaving perform another walk through; however, this may not be always possible.
o    When damages are found in the unit, they should be listed in detail and the cost of repairing them.
o    Prepare the statement in detail with all the damages and repair costs, and send it to the tenant within the stipulated time.

Being Cordial

It would of course be much better to take steps that would ensure the tenant does not damage the unit in the first place. For this, regular unit inspections would be the best strategy. However, make sure you do not do this too frequently. It is also important to provide sufficient notice of such an inspection, since you will be inspecting the inside of the unit and taking the tenant’s time and invading their privacy somewhat as well. Maintaining outstanding relations with the tenants also goes a long way in reducing damages, tenant retention, and other issues.