The below topics are discussed in much more depth on our members' Security Deposits page.
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.
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. 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 and that you refund the deposit and/or an accounting of amounts not being returned within the time limit required by your state law.
Some of the 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?
Most state laws and standard leases state that a renter is not responsible for ordinary wear and tear.
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 other pages.
Many states, including Michigan, do not allow a deduction from security deposits for cleaning.
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.
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. However, a landlord who knows his business and follows the rules, can often prevail.
Security Deposit Insurance
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 above topics are discussed in much more depth on our members' Security Deposits page.