Landlords accept security deposits as a form of insurance. If the tenant damages the property or leaves with unpaid bills, the landlord can use the money from the security deposit to help cover those expenses. When accepting a security deposit, there are several things landlords need to understand to protect themselves and their property.
The security deposit does not belong to the landlord or in our case, the property manager. That money needs to be held in a secure account, so when the tenant moves out, it can either be returned or applied to acceptable expenses. That money cannot just be put into an account with the rents and other income streams to be spent as needed. It needs to be available if and when the tenant moves out.
You may have to pay interest on the security deposit. If you collect anything over the first month’s rent, you have to pay 5% interest on that amount on the one-year anniversary of accepting the money and every year after that. For example, if the rent is $1000 per month, and you collect a $2000 security deposit, you will have to pay interest on the $2000.
Withholding security deposit money for damage is not always supported by law. The law states that ordinary wear and tear cannot be deducted from the deposit. However, the description of “ordinary wear and tear” is highly subjective and judges enforce it differently from one community to the next. For example, I do not believe having to repaint due to the walls being so dirty they can’t be cleaned or full of scratches and marks should be considered “ordinary.” Most courts, however, do not agree with that and will not allow landlords to deduct for painting costs. Our policy is to make the deductions we feel are necessary and appropriate and then if the court questions it, we can make our case and work with the owner regarding what the court decides. This is another example of when before and after video inspections become helpful
You MUST provide an accounting of the deposit within 30 days. By law, the landlord is required to either provide the tenant with their deposit, and itemized account of repairs needed that used up their deposit, or a combination of part of the deposit and the itemized list of repairs. It does not matter if the tenant is getting nothing back due to damage to the apartment, the landlord MUST provide the tenant with a written statement regarding the deposit. If the tenant can prove the landlord did not provide this within 30 days, they can get as much as double their deposit back.
As a property manager, I understand the laws regarding security deposits inside and out. I am also familiar with the courts in the greater Cleveland area and what each of them generally finds as acceptable wear and tear. That knowledge along with the various processes and checklists we have in place to run our business enables me to provide the best care for the properties I am entrusted with. Regardless of whether the property owner is local or out-of-state, they can rest assured that their security deposits are protected, and they are protected from needless fines and aggravation.
Our experienced investment property management team can relieve you of the burden of managing your rental property while saving you some serious money! Call us today at (440) 220-7300 to see how we can help you!