A. What is a Security Deposit?
A security deposit is a tenant’s cash that a landlord holds during the rental term to offset potential damages caused by the tenant.
It is not rent. A landlord need not apply it to the tenant’s last month’s rent. The tenant must still pay rent during the last month of the tenancy. The landlord holds the deposit until after the tenant vacates. The landlord returns it if the premises are in satisfactory condition. Otherwise, the landlord can use some or all of it to cover:
– the reasonable cost of repairs caused by neglect or abuse
– the cost of missing items that were included with the rental
– ordinary cleaning charges
– unpaid rent
– use and occupancy charges (equivalent to rent) if the tenant overstayed
– the cost associated with breaking the lease
– a court award granted to the landlord.
B. Holding the Deposit
The landlord must segregate security deposit from his own funds. He must inform the tenant where the deposit is held. If there are six or more units, the landlord must place the deposit in an interest bearing account.
C. Best Practices to Avoid Disputes
Clear communication and thorough documentation can reduce disputes. Before the tenancy begins, landlords should photograph the premises and document their condition with a checklist that the tenant signs.
Before the tenancy ends, the landlord should provide move-out instructions to the tenant. For example, the landlord should remind the tenant to thoroughly clean the premises, and they should schedule a walk-through inspection. If the landlord notices a problem for which a deduction is warranted, they can document it and possibly work out an agreement. Documentation about the initial condition of the premises can aid avoid disputes about whether damage pre-existed the tenancy.
D. Documenting Deductions
A landlord should photograph damages, obtain reliable repair estimates, and provide an itemized list of deductions, if any. If the landlord handles the repairs himself, he can deduct the reasonable cost of repair. The landlord cannot charge for normal wear and tear. The longer the tenant occupied the premises, the more wear and tear there will be.
If the tenant challenges the deductions or the repair cost, clear documentary evidence can avoid disputes or win lawsuits.
E. Returning Unused Security
The landlord must return the unused deposit to the tenant within a reasonable period of time. If their agreement does not define a reasonable time period, generally, 30 to 60 days is considered to be reasonable. The tenant should provide the landlord with a forwarding address to send the check to. To prove receipt, the landlord should send it by certified mail or use a return receipt. If the damage exceeds the security, the landlord can seek additional money for repairs
If you are a landlord or tenant and you need to negotiate a commercial or residential lease or if have a landlord-tenant dispute, I can help.
About the Author: Bryan L. Berson, Esq. is an attorney and mediator at The Berson Firm, P.C., a law firm that handles estate administration and planning, real estate, commercial transactions, and commercial litigation. His e-mail is bberson@bersonfirm.com. His phone number is (631) 517-1055. Connect with The Berson Firm on Facebook and Bryan L. Berson on LinkedIn. The firm’s website is www.bersonfirm.com.
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