When you are moving to a new rental property, you will have to pay a security deposit. These security deposits protect landlords from financial losses. On top of that, they give tenants peace of mind. When it’s time to return the security deposit, things often become tricky since most tenants usually expect to get their full amount. However, landlords want to deduct for every scratch and scuff.
If you are a property manager, you will stand in the middle of this crisis. Read this guide, and we will share how you can manage security deposit returns in the right way.
Why Thoughtful Itemization Matters
Think about the last time you moved out of a rental property. Did you wonder if you would get back the full security deposit? Most tenants feel anxious about their security deposit, often worrying that minor, everyday marks will lead to unexpected changes.
On the management side, you will have the responsibility to restore the unity for the next resident, which requires a budget for repairs. Someone has to pay for it, but if you keep the deposit without explanation, it may cause an issue with your tenant.
Security deposit itemization will create a paper trail that protects everyone involved. The law always favors landlords who document everything. On the other hand, tenants appreciate transparency, even in situations where they owe money.
Thoughtful property care means focusing on transparency while providing a detailed paper trail that protects both sides. There are situations where such disputes may escalate to small claims court.
A single lawsuit can cost thousands of dollars in legal fees to a landlord. It can also hurt reputation. This is why landlords should be careful when picking the right property managers to avoid such situations. Working with a proactive Baltimore property manager can help explain charges clearly and neutrally.
What Items Can Be Legally Deducted?
Not every issue will justify a deduction. Thoughtful care requires a discerning eye to distinguish the actual damage to the property. Here are the situations where you can legally proceed with deducting money from the security deposit.
Unpaid Rent
This is quite obvious, but timing plays a big role. If your tenant owes money at the time of moving out, you can deduct that from the security deposit. Even if they don’t give proper notice, you can deduct this from the final month’s rent. However, you need to document all deductions.
You can include copies of the lease terms and note the move-out date. Then you can calculate the exact amount of rent that the tenant owes. This will help you to prevent arguments over the amounts.
While keeping this in mind, you need to get the right amount of security deposit from the tenants as well, since getting a smaller amount may not help you to cover expenses at a later stage. When determining how much is a security deposit, some managers may consider a higher amount to offset potential concerns regarding credit or rental history.
Damage Beyond Normal Wear and Tear
Here’s where things get complicated. Normal wear and tear refers to natural aging that can happen when people live in a space. Damage means something broke beyond typical use.
Faded paint from sunlight is normal wear, but a hole punched in the wall is damage. Worn carpet in high traffic areas is normal wear, but wine stains or burns are damage. The age of items should not be ignored at the time of making a decision. An item that is five years old has less value when compared to a new one. You will not be able to charge the full replacement cost for something that is already depreciated.
Cleaning Costs vs Routine Turnover Expenses
You need to clean every unit between tenants. However, it will not be possible for you to charge for it at all times. You will also not be able to deduct cleaning fees if the previous tenants suddenly move out. Take note that deductions are only appropriate for excessive issues such as abandoned trash or a greased oven.
How Does Fair Itemization Benefit Landlords, Tenants, and Managers?
Property managers need to understand that they gain their positive reputation through excellence in serving tenants. Word spreads fast in rental markets, and tenants can also talk to each other while posting their experiences online through reviews.
If you are a landlord, your primary interest would be protecting your investment. Security deposits can offer that protection, but you need to manage them right. Itemization will ensure that you will recover actual costs from the tenants without any legal exposure. Detailed records will also help during audits and tax preparation.
If you are a renter, you expect to understand all deductions from your security deposit with transparency. Nobody likes surprise deductions, and this is where itemization can help you to get a clear picture of what exactly has happened.
Final Words
Security deposit itemization is not just paperwork. It is the foundation of professional property management. As a property manager, you need to deduct all legitimate costs that you can prove. You need to have a clear understanding of the difference between normal wear and actual damage as well.
At the time of deducting money, you need to use real receipts to justify all charges. Along with that, you need to take photos at every inspection. Always stick to the state-specific laws and timelines to be on the safe side. The effort you put in will help you to avoid disputes in the long run.
