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First the bad news: Most landlords are not in strict compliance with their state's security deposit laws. Penalties for unlawfully withholding any of the tenant's money are often double or triple damages, plus actual attorney fees. Landlords must always be very careful when making any disputed deduction from a departing tenant's security deposit. Sometimes eating the cost of minor damage is very cost effective for landlords.
Now some other news: In several states, including New York, if a tenant commits waste (damage beyond normal wear and tear), the tenant can be held liable for triple the amount of damages. Check your state law to see if the law applies in your situation.
How to Make Deductions from a Security Deposit Some states allow deductions for cleaning, others do not. Some others require move-in and move-out check lists in order for a landlord to make any claim for damages. If you are going to play the game, you must know and follow the rules in your location. The following are some general rules that apply in most states and are based primarily on common sense.
If you wish to withhold all or part of a security deposit to recover back rent, utilities or to repair damages caused by a tenant or their guest, make sure your accounting is detailed and complete. Most states require that landlords return security deposits, with a detailed list of any deductions, to the tenant within 30 days after they move out. Landlords are notorious about providing sketchy information about deductions for sometimes dubious damage. The claim against a security deposit must include valid estimates for any repairs, or the cost of those that have been done.
An inadequate accounting in a timely manner invariably leads to disputes, because the tenant won't know exactly what damage you're claiming. Imagine a bill from your mechanic that simply says "fixed your car." Disputes lead to all kinds of trouble, the least of which may be a law suit. And if a court finds that you wrongfully withheld some or all of the security deposit because you didn't provide enough detail, it is sure to cost you a bundle.
Points to Cover in Itemization
- Utilities due
- Each damaged item and its location.
- The kind of damage, with detail.
- Repairs that are needed or have been done.
- Repair or replacement cost.
Is it Damage, Cleaning or Ordinary Wear and Tear?
When you retain all or part of an former tenants security deposit, you must explain why you considered the damage worse, or different, than ordinary wear and tear. Most state laws and standard leases state that a renter is not responsible for ordinary wear and tear. Some states even define the term, for example: "natural and gradual deterioration of the rental unit over time, which results from a resident's normal use." We further define the term, and most others relating to the rental housing business, in our Glossary.
If a landlord doesn't clearly describe the kind of damage and where it occurred, a court might say that the deduction was "arbitrary" and disallow it because the differences between damage and wear are sometimes subtle. We provide a list of examples on our Wear & Tear page.
Many states, including Michigan, do not allow a deduction from security deposits for cleaning. They rationalize the law by contending that cleaning is a normal cost of doing business.
Some landlords give tenants a schedule listing the cost of cleaning, repairing or replacing specific items when they move in. If you do this, you should obviously use the same costs when you make deductions.
If you don't provide a cost schedule and you're sending out the notice of deductions before you've done the repair or gotten an invoice, you should use a good faith estimate of the cost. As long as your estimate is "reasonable," and based on going rate in the area, a court should allow it.
Landlord Tenant Legal Troubles
In a 1992 Ohio case, a landlord sent a refund check for part of the security deposit and an itemization explaining why she was keeping the rest of it. One entry read: "$40 cleaning." When the former resident challenged the deduction, the court ruled that the itemization wasn't specific enough. The owner had to pay $580, twice the $40 that was wrongfully withheld, plus $500 to cover the former tenants attorney's fees. The tenant had asked the court for $4,179 in attorney's fees and both parties appealed. The trial Courts decision was affirmed, stating that attorney fees had to bear some relationship to the amount of money and the simplicity of the issues. [Nolan v. Sutton].
Good detail helped a Connecticut landlord defend the security deposit deductions when the former tenant complained to the court that the damage wasn't properly itemized. The judge upheld $583. in deductions and went out of its way to praise the owner for "noting with particularity which rooms required work" [Martinick v. Rothman].
A Michigan landlord withheld all of a one month security deposit as rent due, because a tenant over stayed her 30 day notice by three days. The tenant complained to the court that she should pay per diem for the three days. The landlord countered that they set their rent amount by the month, not by the day. The court agreed, noting that daily rates in hotels are substantially higher than monthly rates. [Atherton v. Lick]
A Louisiana landlord refused to return the security deposit of a resident who'd lived in an apartment for four years. The owner sent a notice asserting that the resident left "considerable damage." This wasn't a valid itemization, the court ruled, because the owner wasn't specific about the nature of the damage. As a result, the owner had to pay the resident $400 [O'Brien v. Becker].
In Summary ...
Because the penalty for wrongfully withholding a security deposit can include double or triple damages plus attorney's fees, even a small mistake can get very expensive. Like the Ohio and Louisiana cases, landlords can lose hundreds, even thousands of dollars for improper deductions or inadequate paperwork. However, a landlord who knows his business and follows the rules, can often prevail as in the Connecticut and Michigan cases.
Also see: Citations for State Laws on Security Deposits. : Security Deposit Insurance Now, tenants may not have come up with substantial security deposits, in addition to the first (and sometimes last) month's rent when signing a new lease. Security Deposit Insurance allows tenants to pay a small monthly fee instead of a large cash deposit at move-in; usually between 1 and 5% of the monthly rent.
There are major benefits to landlords as well. Almost every state, and some local governmental units, extensively regulate the amount and disposition of deposits. The mandated administration becomes a financial burden instead of benefit for the landlord.
In the event of tenant default in rent or a claim for damages, the insurance company pays the landlord within thirty day; no hassle, no court date, no legal fees.
See our new Security Deposit Insurance Page |