Chapter 15 Returning Security Deposits and Other Move-out Issues

• Library: Every Landlord's Legal Guide (Nolo) (2020 Ed.)

CHAPTER 15 Returning Security Deposits and Other Move-Out Issues

Preparing a Move-Out Letter

Inspecting the Unit When a Tenant Leaves

Applying the Security Deposit to the Last Month's Rent

Basic Rules for Returning Deposits

Deductions for Cleaning and Damage

Reasonable Deductions

Common Disagreements

Deductions for Unpaid Rent

Month-to-Month Tenancies

Fixed-Term Leases

Deducting Rent After You've Evicted a Tenant

Preparing an Itemized Statement of Deductions

Returning the Entire Deposit

Itemizing Deductions for Repairs, Cleaning, and Related Losses

Itemizing Deductions for Repairs, Cleaning, and Unpaid Rent

Handling Deposits When a Tenant Files for Bankruptcy

Mailing the Security Deposit Itemization

Security Deposits From Cotenants

If a Tenant Sues You

How Long Tenants Have to File Suit

Settling a Potential Lawsuit

Preparing for a Small Claims Court Hearing

Penalties for Violating Security Deposit Laws

When the Deposit Doesn't Cover Damage and Unpaid Rent

The Demand Letter

Should You Sue?

Ex-Tenants Who Have Moved Out of State

Can the Small Claims Court Hear Your Case?

Can You File Your Case in Your Local Court?

Finding and Serving Your Ex-tenant

Collecting If You Win

What to Do With Property Abandoned by a Tenant

Why Has the Tenant Left?

When the Tenant Owes You Money

Legal Notice Requirements

How to Handle Abandoned Property When Tenants Don't Respond

Landlord Liability for Damage to Tenants' Property

FORMS IN THIS CHAPTER

Chapter 15 includes instructions for and samples of the following forms:

• Move-Out Letter
• Letter for Returning Entire Security Deposit
• Security Deposit Itemization (Deductions for Repairs and Cleaning)
• Security Deposit Itemization (Deductions for Repairs, Cleaning, and Unpaid Rent)

The Nolo website includes downloadable copies of these forms. See Appendix B for the link to the forms in this book.

As any small claims court judge will tell you, fights over security deposits account for a large percentage of landlord-tenant disputes. Failure to return security deposits as legally required can result in substantial financial penalties if a tenant files suit.

Fortunately, you can take some simple steps to minimize the possibility that you'll spend hours haggling in court over back rent, cleaning costs, and damage to your property. First, of course, you must follow the law scrupulously when you return security deposits. But it's also wise to send tenants, before they move out, a letter setting forth your expectations for how the unit should be left.

This chapter shows you how to itemize deductions and refund security deposits as state laws require, and how to protect yourself both at the time of move-in and at termination. It describes the penalties you could face for violating security deposit laws. This chapter also covers how to defend yourself against a tenant's lawsuit as well as the occasional necessity of taking a tenant to small claims court if the deposit doesn't cover unpaid rent, damage, or cleaning bills. Finally, it discusses what to do when a tenant moves out and leaves personal property behind.

We cover key aspects of state deposit law in this chapter and in Chapter 4. In addition, be sure to check local ordinances in all areas where you own property. Cities, particularly those with rent control, often add their own rules on security deposits.

RELATED TOPIC

Related topics covered in this book include:

• How to avoid deposit disputes by using clear lease and rental agreement provisions: Chapter 2
• Deposit limits; requirements for keeping deposits in a separate account or paying interest; last month's rent and deposits: Chapter 4
• Highlighting security deposit rules in a move-in letter to new tenants; taking photographs and using a Landlord-Tenant Checklist to keep track of the condition of the premises before and after the tenant moves in: Chapter 7
• Notice requirements for terminating a tenancy: Chapter 14
• State Security Deposit Rules: Appendix A.

Preparing a Move-Out Letter

Chapter 7 explains how a move-in letter can help get a tenancy off to a good start. Similarly, a move-out letter can also help reduce the possibility of disputes, especially over the return of security deposits.

Your move-out letter should tell tenants how you expect the unit to be left, explain your inspection procedures, list the kinds of deposit deductions you can legally make, and tell tenants when and how you will send any refund that is due.

A sample Move-Out Letter is shown below and the Nolo website includes a downloadable copy. See Appendix B for the link to the forms in this book. You might want to add or delete items depending on your own needs and how specific you wish to be.

Here are a few points to consider including in a move-out letter:

• specific cleaning requirements, such as what to do about dirty walls, or how to fix holes left from picture hooks
• instructions regarding recycling and disposing of paint and household hazardous wastes
• a reminder that fixtures (items that tenants attach more or less permanently to the wall, such as built-in bookshelves) must be left in place (see the discussion of fixtures in Chapter 9 and Clause 12 of the form agreements in Chapter 2)
• details of how and when the final inspection will be conducted
• a request for a forwarding address where you can mail the deposit
• information on state laws (if any) that allow a landlord to keep a security deposit if the tenant doesn't supply a forwarding address within a certain amount of time ("Mailing the Security Deposit Itemization," below), and
• information on state laws regarding abandoned property (discussed at the end of this chapter).

Move-Out Letter

Inspecting the Unit When a Tenant Leaves

After tenants leave, you will need to inspect the unit to assess what cleaning and damage repair is necessary. At the final inspection, check each item—for example, refrigerator or bathroom walls—on the Landlord-Tenant Checklist you and the tenants (hopefully) signed at move-in. (An excerpt is shown below. See Chapter 7 for a complete checklist.) Note any item that needs cleaning, repair, or replacement in the middle column, Move-In Condition.

RESOURCE

California has special rules and procedures for move-out inspections. California tenants are entitled to a pre-move-out inspection, when you tell the tenant what defects, if any, need to be corrected in order for the tenant to optimize the security deposit refund. California landlords must notify the tenant in writing of the right to request an initial inspection, at which the tenant has a right to be present. (Cal. Civ. Code § 1950.5(f).) For details, see The California Landlord's Law Book: Rights & Responsibilities, by Nils Rosenquest and Janet Portman (Nolo). This book is available at bookstores and public libraries, or can be ordered directly from Nolo (online at Nolo.com or by phone, 800-728-3555).

Many landlords do this final inspection on their own and simply send tenants an itemized statement with any remaining balance of the deposit. If at all possible, we recommend that you make the inspection with tenants who are moving out, rather than by yourself. A few states actually require this. Doing the final inspection with the tenants present (in a conciliatory, nonthreatening way) should alleviate any of the tenants' uncertainty concerning what deductions (if any) you propose to make from the deposit. It also gives tenants a chance to present their point of view. But, best of all, this approach reduces the risk that tenants who feel unpleasantly surprised by the amount you withhold from the deposit will promptly take the matter to small claims court.

If you have any reason to believe a tenant will take you to court over your security deposit deductions, have the unit examined by another, more neutral person, such as another tenant in the same building. This person should be available to testify in court on your behalf, if necessary, should you end up in small claims court.

Landlord-Tenant Checklist

tip

Photograph "before" and "after." In Chapter 7, we recommend that you take photos or videos of the unit before tenants move in. You should do the same when tenants leave, so that you can make comparisons and have visual proof in case you are challenged later in court.

Should You Let the Tenant Clean or Fix the Damage?
Many tenants, faced with losing a large chunk of their security deposit, will ask for the chance to do some more cleaning or repair any damage you've identified in the final inspection. A few states require you to offer tenants a second chance at cleaning before you deduct cleaning charges from the security deposit. Even if your state does not require it, you might wish to offer a second chance anyway if the tenant seems sincere and capable of doing the work. This could help avoid arguments and maybe even a small claims action. But, if you need to get the apartment ready quickly for a new tenant or doubt the tenant's ability to do the work, just say no. And think twice if repairs are required, not just cleaning. If a tenant does a repair poorly—for example, improperly tacking down a carpet that later causes another tenant to trip and fall—you will be liable for the injury.

To be on the safe side, keep your inspection notes, photos, videos, and related records for at least two years. Technically speaking, in most states tenants have up to four years to sue you over security deposit agreements, but the chances of former tenants suing after a year or so have passed are slim.

Applying the Security Deposit to the Last Month's Rent

If no portion of the tenant's deposit was called last month's rent, you are not legally obliged to apply it in this way. When giving notice, a tenant might ask you to apply the security deposit toward the last month's rent.

Why should you object if a tenant asks to use a deposit you are already holding as payment for the last month's rent? The problem is that you can't know in...