Returning the Security Deposit

I attended a landlord seminar today that was hosted by an attorney that represents tenants. It was a fascinating look at landlord issues, but with a tenant advocate teaching it. He spoke about many of the loopholes and other places that landlords have a tendency to not follow the law or the letter of their leases and how the tenants can win lawsuits or defend against evictions.

There was quite a discussion about security deposits and I thought it made sense to lay out some of the gotchas and give you some reminders on how the process is supposed to work.

If possible, take pictures of the unit prior to the tenant moving in and store them on your computer. The attorney explained that often the “move-in” form is simply filled in with OK and a line through the entire column for each room. He stated it was easy to defeat this in court as meaningless. Pictures before the move-in will give you considerable ammunition if you get pulled into court by the tenant for the amount withheld from the security deposit.
A landlord has 3 weeks from the date that the tenant moves out or the receipt of the tenant’s new address, whichever is later, to get the security deposit or security deposit disposition letter in the mail. That is the law, but the attorney recommended that even if you do not know the new address of the tenant, you should still put the letter in the mail to the old address. If that letter forwards to the new address, great. If it is returned, put that in your file so you can show you tried.
Even if at the end of the lease or tenant’s occupancy, there is nothing left of the security deposit, you must still send a written disposition letter. Even if the tenant owes you 3 months of rent, do not neglect this.
If you fail to send the letter or security deposit within 21 days, the tenant can take you to court. If they win, you owe them double the entire security deposit, plus interest (without any deductions for missed rent or damages), plus $500 as a penalty. For example, if the damage deposit was $1000 and the tenant lived there 1 year, the amount would be $1000 + $5 + $1000 + $5 + $500 = $2510. That is a lot of money!
You can only deduct for physical damages beyond “ordinary wear and tear”. So what is wear and tear? Although that is somewhat subjective, repainting and cleaning carpets is NOT considered excessive, normally. If they are really worn or dirty, you could make a case that it is excessive damage (and I have seen excessive). Make sure to document this fully.
When you put amounts on the security deposit disposition letter, make sure to use real numbers. A friend of mine was sued by a tenant for the damage deposit money withheld. The tenant won the case. The judge said that if my friend would have had receipts he would have easily won. Do not put round numbers for supplies and repairs. Did you really spend $20 on cleaning supplies? Was the carpet cleaner really $60? Use the exact figure. It may help convince the tenant that you have receipts and you may not end up in court. Use a time sheet if possible to account for your time if you do the work. Do not round the hours.
Before you start any work or cleaning, take pictures of all the problems. Then you can use those pictures to compare to the before photos if you get to court. As a side note, if your tenant leaves the property a mess and they are on rental subsidies, like Section 8, send the after pictures to their case worker. It may help the next guy (and you can get some secret pleasure out of getting the tenant in trouble).
Do not always assume you are keeping the security deposit. I know some landlords that are keeping the deposit despite having a good tenant. They find anything they can not to give it back. Be honest and fair. Otherwise you may end up in court.
Effective August 1, 2010, the time you as a landlord are required to store your tenant’s left over stuff has been reduced to 28 days.

Following the letter of the state law and the details in your lease is the proper way to keep yourself out of court fighting over the disposition of security deposits.

5 comments

#1Darin AndersonAugust 24, 2010, 1:05 am

Requirements to send letters by a certain date always seem like hear say to me. So if I send a letter to them detailing why there is no security deposit left there is no proof that I sent that letter. So they can just claim I never sent it. If I truly didn’t send it I can just claim I did. Unless I send every communication with the tenant as certified mail return receipt requested (which will cost a few bucks each time), it’s all hear say.

I guess if it was a tenant that you expected potential problems the certified mail return receipt requested would be the only way to protect yourself. If a tenant surprises you and sues you when you didn’t expect it, I still think the timing of the letters is all hear say. In fact the content of the letter is probably hear say. The tenant could produce a different letter and claim that is the letter I sent. Even if it doesn’t have a signature the tenant could say they didn’t sign it, they just sent me this. And an unscrupulous landlord could produce a different (signed) letter in court as a supposed copy of what they sent when that is not what they really sent if they didn’t sign the real letter that they did send.

I don’t know how the court deals with these types of issues. It sounds like the burden is placed mostly on the landlord but in some of these cases I don’t know what you could do to prove the content of what you really sent.

Did this lawyer say anything about proving when a letter was sent and what was actually in the letter that was sent?

——

And as far as pictures go, I am not sure how that is provable either. You can have your pictures timestamped but you can set your camera to any timestamp you want. I can take pictures after I fix the place up and set my camera to a date/time prior to their move in and claim that was the prior condition. I could have a 10 year old picture and photoshop the timestamp.

Maybe its a matter of assuming people won’t go through that effort, but if I am willing to go through it before hand for every unit, I could certainly go through it after the fact for the few units that give me trouble.

As you know, I have 7 identical units right now. Who is to say which unit my pictures are from?

To me, it feels like just about every issue and every suggestion by this attorney still comes down to hear say and I don’t see how you get around the judge having to decide who is lying.

#2Scott FicekAugust 25, 2010, 10:49 am

All good points.

I have a friend that will send a small amount back to the tenant always, such as $24.85. Then if they cash that, it proves they received the letter and it can be shown in court that by cashing it, they have accepted the amount as compensation.

As for pictures, I guess you are correct that it could be proven that they are from another unit or from years ago, but it would be better than nothing and may help you defend yourself over a less prepared tenant.

#3White Bear Lake MN Homes for SaleAugust 25, 2010, 1:11 pm

I am very impressed with the content in this Security Deposit posting. I teach landlording classes in the St. Paul Community Education Program, and I rarely have to dive this deeply into the topic of security deposits (likely because most of my students are brand new to the topic of landloarding). I walked away with some nice tangible knowledge here.

And the discussion from Darin Anderson about timestamping pictures really does create an element of hear say. In the end, however, the more documented and organized a landlord presents himself/herself, the more credibility they will likely have in they ever have to defend the security deposit disposition. Great post!

#4BNovember 20, 2010, 10:49 pm

I am having an issue currently. I have not received ANY notice or ANY refund of my security deposit. The slum we were living in is going to be demo’d in a year or so too. So, I am completely pissed off I have to go file. But I expect to win, by these laws I am entitled to double plus punitive plus interest. I guess I am experiencing a criminal management… This was premeditated and I will have justice.

#5SandyjosinAugust 11, 2011, 6:54 pm

Can a landlord hold your deposit if you still owe your last bill to the city office for electric service. A church owns the house and has nothing to do with me paying bill to the city.

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