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Landlord Withholds Security Deposit

Landlord Withholds Security Deposit, Tenant Says She "Discriminated"

My tenants of four years are accusing me of "racial discrimination" for failure to return their security deposit. I only charged them $450 security deposit and had to charge them $250 for carpet replacement due to extreme damage from stains that would not come up even with professional cleaning (which they verbally agreed they ruined); $150 for installation.

They put up incomplete wallpaper, which had to be removed because it had huge gaps with no paper and they never received permission, which the lease required. They failed to clean at all inside, and it was left filthy. They failed to pay five months of homeowners fees, also required in the lease. They permanently stained wallpaper in the kitchen.

As a result, we ended up over $400 in the hole.

They are taking me to court because of "racism," when, in fact, for four years we had an excellent relationship. We never had any problems.

I sent them an itemized list within nine days of the end of their lease agreement.

This was my first tenant, but my new tenants are also a different race, so that proves I do not discriminate.

What legal rights do I have and what do I need to do? All my deductions from their deposit were legitimate costs.

Thank you,
Cindy R.

As long as you followed the requirements the time limits for accounting for their security deposit, you are in the clear.

Charging racism, when you are guilty as sin, is the last refuge of a scoundrel.

This landlord appears to have followed the law covering security deposits. But many landlords don't.

How do landlords get themselves into trouble when dealing with security deposits?

1. No trust account

Few states require a separate trust or bank account for security deposits. But if your state does, make sure that you set one up exactly according to the requirements of your state law. If you don't, not only may you not collect a security deposit, if you do collect one, albeit contrary to your state law, you may not deduct any damages from it. In fact you may have to repay multiples of the amount you collected to the tenant.

2. Inaccurate or sloppy accounting

You are allowed to deduct from security deposits property damage over and above "normal wear and tear," back rent and late fees and other agreed-upon fees (such as the homeowners association fees in the question above).

In order to properly deduct those costs you must account for them accurately and completely. That means keeping receipts for every repair you make on the property. It also means accounting in detail for all unpaid rent and fees.

Unacceptable:
Repainting apartment: $148.46

Acceptable:
Paint for apartment: 3 gallons wall paint at $19 per gallon, $57.00. One gallon trim paint $24.00.
Total for paint, $81.00
Paint rollers: 2 at $9.95 each, $19.00
Paint brushes: 2 at $12.95, total $25.90.
Masking tape: 1 roll, $4.95
Drop cloths: 2 at $3.95, total $7.90.
Sales tax: $9.71
Total for paint and supplies: $148.46

Mileage for buying paint and trips to apartment: 57 miles @ 34 cents a mile, total $19.38.

Some landlords will deduct their time. Don't do it. According to the courts, your time isn't worth anything. In addition you took no money out of your pocket to pay a contractor. Security deposits are for the purpose of making you "whole," meaning compensating you for expenses to make the unit rent-able again, or to put it back in the same condition it was when the tenant moved in. Only if you hire someone to make repairs, paint and such can you deduct labor costs.

If you have set up your own company for making repairs on your properties for you, then you can charge out the costs of repairs and such. Just be sure to bill yourself with an invoice from the repair company and write a check to it.

3. No move-in, move-out or property condition form

Bad tenants will inevitably claim "it was that way when I moved in," when you deduct damage from a security deposit. A move-in form proves otherwise. You can obtain one from your local apartment, landlord or rental owners association. If you don't have such a form, and the tenant sues you, count on losing in court. With such a form, signed by the tenant, your chances of winning jump ten fold.

4. Time limits

Every state has a time limit for providing an accounting and/or returning the security deposit to former tenants. Those vary from two weeks to 60 days, depending on the state. Be sure you know how long you have in your state. If you don't refund it or account for it inside the time limit, you may not keep it at all.

If the tenant owes you more than the security deposit covers, send a bill for the difference. You might get paid for it, but probably won't. If you don't send the bill as part of the accounting, and within the time limit, though, you certainly will not be able to come back later and sue them for it.

Robert Cain, publisher of the Rental Property Reporter, has been providing solutions for the rental property industry for seventeen years. He is author of the landlord manuals Profitable Tenant Selection, Can Section 8 Work for You?, Using the Gross Monthly Rent Multiplier, the tape series “Avoiding the Tenant from Hell,” and several other booklets and manuals for landlords and property managers. In addition, he writes and produces newsletters for other companies that serve the rental property industry. He is a highly sought-after speaker, seminar leader and consultant on property management and real estate topics.

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