As a landlord, the last thing you want to do is run afoul of federal or state landlord-tenant laws. Which, as it turns out, are quite strict about what landlords can and can’t use security deposits for.
Deni breaks down exactly which expenses landlords can deduct from their tenants’ security deposits — and which they have to refund, even if the renter moves out having cost them money in some way.
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Deni: Noon, everyone, and welcome to Spark Rental Facebook Live and podcast, as you can see, I’m all alone today. Brian is away with his family. And please let me know where you are coming in from tuning in from. And if you have any questions, anything, just throw it in the chat. So last week we talked about squatters versus trespassers and their rights and the difference between them too. This week, we’re going to talk about security deposit return when you can and can’t keep your tenant security deposits. And what for? So, let’s jump right in and start this. First of all, I’m sure you all know this, but I’m just going to put it out there. Every state and even locality has their own specific set of regulations and laws that have to do with how long you have to return a security deposit and literally what you can deduct and what you may not. But basically. Anything beyond, and I’m sure you’ve heard this term anything beyond normal wear and tear, so normal wear and tear is any excessive damage or dirtiness. So, let’s talk about. That cause fine lines between some of that. First of all, I mean, if somebody has a large like hole, especially now like people are mounting TVs and whatnot if they leave and then you have those big marks in the wall from the hanging part of the TV, that success of wear and tear, they have to actually repair that before they leave.
Deni: Burns rips things like that, any broken kitchen cabinets that weren’t broken before drawers’ things like that. Countertops are great. I have had more countertops destroyed by renters, and it’s, you know, you can see that it was just instead of using a cutting board, they were just slicing right on the countertop. And that’s hard to repair. So usually that needs to be replaced if you include window coverings and they’re not there anymore or they’re destroyed now. And I think if they’re just a little dirty, you can’t do that, but if they’re completely destroyed, then you can definitely. Deduct for that, if there’s any broken appliances, plumbing, all of that stuff, that’s, you know, due to negligence or just a rent or beating on it. That’s definitely can come out. And then the big one is if they leave their stuff behind, and you can deduct whatever cost for hauling and all of that and that is in the inside and the outside of the property. So, the difference of that and normal wear and tear normal is just your normal aging process of, you know, everything has their limits with. You know, like paint gets faded wallpaper if you still use that gets faded.
Deni: Plumbing can get broken or clogged over time. You know, we had incident where tree roots got into the plumbing, I mean, obviously that’s not a tenant issue. That’s clearly an issue that you would have to fix so that you could not deduct furniture, marks and carpet. You can’t really deduct for that. And just some other things. So, you have to be really careful and understand the difference between what gross negligence is on a tenant’s part and just normal wear and tear. And then the other thing you have to keep in mind is there’s a life expectancy, and every locale could have definitions in their regulations that define what they consider to be the lifetime of an appliance. And I’m not sure which state it is, whether it’s California, New Jersey, but one of them actually does that. And so, for instance. Appliances have a certain life expectancy, carpets, usually about five years, linoleum can be anywhere from five to 15 years. Gas ranges have a slightly longer life span than an electric range, and fridge can be the same. They go all over the map. To be honest with you, I think that the newer fridges don’t last as long as some of the older refrigerators used to and then microwaves somewhere around five to seven years. And again, you know, it depends how much use they get.
Deni: And that’s where if you have like, you know, one person living in an apartment that’s using these appliances compared to a family of eight, they’re obviously going to get more use for a family of eight. So, I did put a cheat sheet in the chat area and that will help you. What I’m talking about, a lot of that is right there and some other stuff, and it’s good to kind of keep it around because you want to make sure you’re keeping within the wall there. As you have to make sure that you are operating, so don’t be ignorant on your state or local laws on this stuff, make sure that, you know, because some of them you have two weeks, some of them is 30 days, so you want to make sure and know exactly what your laws are. The other thing is you want to make sure and not only wait for them to move out, but before they move in and do a complete inventory and use pictures and an inventory list condition. Put serial numbers and stuff like that. All of that stuff and make sure you take pictures. And then at the end, when you’re when they’re moving, you have that as a reference. And if you do end up in court, you can show them this is what it looked like before.
Deni: This is what it looked like now. So, because a lot of renters will say, oh, that burn was there before I moved here and so forth and so on. So, you want to have proof for. All of that you’re OK with that, the other thing is keep track of everything. Whatever it costs to repair, replace and all of that. And if you happen to do a lot of the work yourself, keep track of the time. So, keep track of your labor and your time in and out. And then usually somewhere on Google or somewhere you can find out what the normal labor rate would be for, whether it was a plumbing repair or electric or general construction. Whatever it is, they find out what it is and include that in your accounting for the security deposit. And then the other thing is make sure your lease explains what you consider to be damages, and that makes sure that you have a very detailed list of what and what cannot be done and how the security deposit will be handled. And all of that thing, because your lease is important in this too, especially if you go to court, they’re going to want to see your lease. They’re going to want to see your inspection list and your move out list.
Deni: So, the more you have documented, the better it is for you in court. So that is all I got today. Kristina has said Do you recommend to use a property manager for out-of-state investors? I keep hearing that is better to grow and not get stuck. There are two schools of thinking there. I personally think you need somebody unless it’s within an hour or maybe two of where you live. I would definitely hire, yes, a property manager of somebody to handle your properties because they’re going to go in and they’re going to do the inspections. A lot of people will hire somebody just for that, like a maintenance company or there are people that will just do inspections, but a property manager, if you’re pretty far, is going to help you with this, and they should also know the local laws and stuff so they can help you there too. I’m going to put a link also for our lease. It’s completely editable and it has a pretty good section on, Security deposits, that’s pretty landlord protective, actually. Of course, I’m going to say that, but it is, so check it out. You can check it out for free and again, it’s completely editable. So, with that, we will see you next week, or Brian, we’ll see you next week and see you on the flip side.
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Even without memorandum, tenants should know the ‘you break it, you buy it’ rule. Most of the time, the visitors are causing the damage but tenants are not taking responsibilities with their guests. Security deposit saves property owners from this kind of vicious cycle. Ergo, tenants should know their responsibilities and build good relationship with their landlords.
Agreed Misha!