What is a Security Deposit?
Let’s start with the basics: a security deposit is used to cover any unpaid rent or damage to the unit after a tenant moves out. You collect this sum (usually equivalent to one or two months’ rent) before the tenant moves in and “hold” it until the end of the tenancy. If the tenant is all paid up and the unit is undamaged, you return this deposit. If not, you use the deposit to square up the rent and/or to return the unit to the condition it was in when the tenant moved in.
What Expenses Can You Deduct from the Security Deposit - and Which You Cannot
Now, let’s get into “wear and tear.” As people live in a space, there will inevitably be some changes to the condition of the unit. Carpets may wear, paint may fade, appliances may reach the end of their useful life, etc. This is considered ordinary wear and tear - or the damage or deterioration that occurs when people live in a space in a “reasonable manner.” And the longer a tenant is in there, the more wear and tear you can expect.
You cannot charge wear and tear to your tenants’ security deposit. Instead, this sum of money is intended to cover “unreasonable” damage. Holes in the wall, broken light fixtures, pet feces on the carpet… these are all examples of unreasonable damage - not wear and tear.
Also, you may not charge tenants for conditions that were present when the moved in. For example, if the bathtub was stained at that time, you cannot charge them for its cleaning or replacement.
Let’s say a tenant moves into a clean apartment. Five years later, they move out and the carpet is a bit rundown, the kitchen linoleum is discolored, and the mini blinds are a little bent. Can you charge for this? No. It’s normal wear and tear.
Now, let’s say that you go in and there are layers of cooking grease and sludge on the stove and countertops. There are food stains on the carpet. The linoleum has been scraped up in spots, and there is trash left behind. This is not reasonable. You may charge the security deposit to clean, hiring a cleaning crew, and/or replace any necessary items.
Some tenants may try to dispute these charges and demand their security deposit back. To avoid this:
- Clearly state your cleaning standards in your lease. They must be reasonable. A property management company can help you make sure you have your i’s dotted and the t's crossed.
- Document the condition of the unit at move-in. Take pictures and video (saved to a thumb drive) and do a walk-through with the tenant before they move in so you can document the condition together.
- Do the same at move-out. Repeat these steps, documenting any instances of normal wear and tear, as well as unreasonable damage.
- Save all cleaning and repair receipts. In case there is a dispute, you can prove that your efforts to return the unit to its prior move-in condition went beyond “reasonable.”
Questions? Asheville Phoenix Properties has a long track record of success and can help clear up any complexities. We can also help you manage your property for maximum effectiveness. Don’t hesitate to call!