CALCULATING SECURITY DEPOSIT DEDUCTIONS

It can be a daunting or uncertain task…assessing deductions to a renter’s security deposit.  There are security deposit laws specific to each state, so you should check the rules and regulations that pertain to your specific location. In most states, you cannot charge your resident for normal wear and tear, but are able to cover your expenses for damages caused by the resident.

This list contains examples of what would qualify as normal wear and tear, which you, as the property owner, are financially liable to repair:

• Faded curtains, carpet, wallpaper or paint due to age or sunlight
• Wear on rugs/carpet (especially in high-traffic areas) due to normal use
• Minor scuffs on floors or trim
• Broken plumbing as a result of daily use
• Broken appliances that are not the result of misuse
• Warped doors and windows caused by moisture, temperature or age
• Small nicks on walls (especially in corners)
• A reasonable amount of holes in the walls due to the hanging of pictures
• Broken seals on doors or windows
• Caulking
• Mold or mildew mitigation (if not due to negligence of resident)
• Replacement of batteries or bulbs for lights and smoke detectors

This list contains examples of what would qualify as damage to the property, which the resident could be financially liable to repair:

• Stains on the curtains or walls that were not previously present
• Ripped, stained or frayed carpets/rugs
• Major scratches or gouges to floors or trim
• Broken or cracked tile
• Clogged drains and toilets due to misuse
• Broken appliances, plumbing or fixtures that are the result of misuse
• Broken doors or windows, including torn or missing screens, blinds, locks and hardware
• Damaged drywall, including excessive holes from hanging pictures
• Broken shelving or cabinetry
• Extermination of fleas or pests
• Cleaning of excessive filth, trash, mildew or mold
• Unauthorized tenant alterations to rental
• Loss income during rental repairs (within reason)
• Depreciated value of the property due to destruction

Back-owed rent, fees or unpaid bills may also be deducted from the security deposit.

Your resident may also be financially responsible for failing to report issues that result in damage to the property. In order to avoid at least partial responsibility for these issues, however, the landlord must have conducted reasonable inspections during the occupancy.

It is important to remember that you need to notify the resident of exactly which items were damaged or needing repair. Provide your renter with a clear list of repairs and even a copy of any receipts. A sample checklist which itemizes conditions upon occupancy and departure from the property, can be found through the following link: Tenant Move In Move Out Inspection

Offer to inspect the unit a few weeks before move-out so that the renter can have the opportunity to repair some of the damage themselves. This can save you some time and effort though a second inspection to confirm completion and quality of work, plus verification that there has been no further damage, is highly advisable.

When calculating the resident’s financial responsibility for repairs bear in mind these two key points:

• It is not legal to charge your residents for upgrades to the property.
• Assess damages with an understanding for depreciation in value

It is important to take into consideration the quality, age and prior condition of the damaged item and then calculate the resident’s financial responsibility based on that data. For example, if a rental unit had a new laminate counter in the kitchen and at the final inspection it was discovered that the surface was marred by a large burn, then the resident would be responsible for the entire cost of replacement. (The item was new at move-in and destroyed at move-out.) The landlord could upgrade to a marble countertop but could only charge the resident for what would have been the cost of replacing the laminate counter.

In order to calculate fees when depreciation is a factor, consider this example: Upon final inspection it was discovered that there was irreparable damage to the carpet. The carpet was of a quality manufactured to have a lifespan of 10 years and was 6 years old at the time of occupancy.  The resident is responsible for paying 40% of the replaced carpet expense (which is the percentage equal to the remaining expected lifespan). The replaced carpet value would need to be calculated based on carpet of equal quality to the carpet that was present at occupancy.

If you are not sure what a fair value is for a specific repair, consult with an experienced contractor.

This article is intended as a starting point to help guide you toward a fair and honest assessment of security deposit deductions. There are specific laws in place for each state, and these should be researched before any deductions are applied.

For more rental property information refer to our website: www.eRentalServicesInc.com