A security deposit return letter is vital for landlords because it shows the property’s condition when a tenant moves out, lists any deductions for damages, and acts as proof of the money return process. This letter helps avoid any fuss and clarifies things between landlords and tenants about what’s happening with the security deposit. Download the free security deposit return templates and collection receipts below and go through my guide to make the process seamless.
⭐Download The Close’s Security Deposit Return form and Security Deposit Receipt form⭐
What Are Security Deposit Return Letters?
A security deposit return letter is a friendly note from a landlord to a tenant at the end of a lease. It explains how much of the security deposit is being returned and includes any deductions for damages or unpaid rent. This helps keep everything clear and transparent, ensuring the tenant understands the final amount they will receive.
Why Security Deposit Return Letters Are Important
A security deposit refund letter makes getting a tenant’s money back easy and clear. It helps avoid rental scams, confusion, legal issues, and fights between landlords and tenants. Here are some reasons why it is essential:
-
Compliance:
Some states require landlords to provide a written explanation for security deposit deductions beyond normal wear and tear. Failure to do so within a specified time can lead to penalties.
-
Communication:
Sending a rental deposit refund form shows professionalism and respect for tenants’ rights, fostering a positive landlord-tenant relationship through transparency and fairness in the refund process.
-
Accountability:
The letter outlines the responsibilities of both landlords and tenants. Landlords must accurately assess damages and make proper deductions, while tenants are responsible for any damages or unpaid rent that may result in deductions.
-
Legal documentation:
The letter is a legal record of the landlord’s decision on the security deposit, protecting both parties in future disputes.
-
Clarity and transparency:
The letter clearly outlines deductions from the security deposit, helping tenants understand any withholdings and preventing misunderstandings.
-
Accurate record-keeping:
Both parties should keep copies of the letter for future reference, such as for taxes or legal matters.
When to Use a Security Deposit Refund Letter
Landlords use a security deposit return letter when a tenant is moving out and the landlord has collected a deposit at the beginning of the lease. It’s a good idea for landlords to send this letter when giving back the security deposit because it documents how much was collected, how it was spent, and when it was returned.
Since different states have various deadlines for returning deposits, landlords must keep those in mind, tackle any repairs quickly, and send out the letter along with the remaining deposit amount. For instance, in Massachusetts, landlords can take a security deposit equal to one month’s rent and return it within 30 days. On the other hand, Arizona allows landlords to collect up to one-and-a-half month’s rent, but they only have 14 days to return the deposit.
Before writing and sending your letter, use our interactive map to see your state’s security deposit return requirements.
Amount limits: 1 1/2 months’ rent
Deadline for return: 14 days
Acceptable reasons for deductions: Unpaid rent, damage to the unit (beyond normal wear and tear), or other expenses pertaining to the tenant’s failure to comply with the terms of the rental agreement
Maintenance of funds: (no statutory guidelines)
Amount limits: 2 months’ rent (only applies to landlords who own 6 or more properties or who have someone else manage or collect rent on their properties)
Deadline for return: 60 days (same exemptions for amount limits apply)
Acceptable reasons for deductions: Damage beyond normal wear and tear, cleaning costs, unpaid rent, late fees
Maintenance of funds: (no statutory guidelines)
Amount limits: 2 months’ rent (3 months’ rent if furnished)
Deadline for return: 21 days
Acceptable reasons for deductions: Damage beyond normal wear and tear, cleaning costs, unpaid rent, any future debts that may be incurred due to tenant’s violation of lease terms, other breaches of lease terms
Maintenance of funds: (no statutory guidelines)
Amount limits: (no statutory guidelines)
Deadline for return: 30 days if unspecified, and up to 60 days if lease specifies
Acceptable reasons for deductions: Damage beyond normal wear and tear, repair, cleaning costs, unpaid rent, utility bills, abandonment of the property
Maintenance of funds: (no statutory guidelines)
Amount limits: 2 months’ rent for tenants under 62 years of age, and 1 month’s rent for tenants 62 and older
Deadline for return: 30 days, or within 15 days of receiving tenant’s forwarding address (whichever is later)
Acceptable reasons for deductions: Damage beyond normal wear and tear, repair, cleaning costs, unpaid rent, utility bills, other charges associated with a violation of lease terms
Maintenance of funds: Must be put into an escrow account with a Connecticut-based financial institution, and landlord must pay accrued interest to the tenant upon the first anniversary of their tenancy as long as the tenant is up to date on their rent (any additional interest must be paid out each successive anniversary and upon termination of the lease)
Amount limits: 1 month’s rent for leases of 1 year or more, no limit in the first year for month-to-month leases (but 1 month’s rent after that), no limit for furnished rentals, and tenant may elect to offer a surety bond instead of a deposit
Deadline for return: 20 days
Acceptable reasons for deductions: Damages beyond normal wear and tear, unpaid rent or late fees, costs associated with re-renting the unit upon breaking the lease early
Maintenance of funds: Must be put into an escrow account with a federally insured, Delaware-based financial institution, and landlord must inform the tenant about the location of the funds
Amount limits: 1 month’s rent
Deadline for return: 45 days
Acceptable reasons for deductions: To cover any costs associated with violations of the lease agreement (such as damage, cleaning, unpaid rent), but the reasons for deductions must be stated in the lease agreement or a written receipt for the deposit
Maintenance of funds: Must be deposited into an interest-bearing account with a financial institution based in the District of Columbia (and this account must be used solely for security deposits), and landlord must pay the tenant accrued interest after 1 year
Amount limits: (no statutory guidelines)
Deadline for return: 15 days, or 30 days if landlord intends to make deductions
Acceptable reasons for deductions: Damage other than normal wear and tear, unpaid rent, or other costs associated with violations of lease terms
Maintenance of funds: Must be deposited into a separate bank account with a Florida-based financial institution (if it’s interest-bearing, accrued interest must be paid to the tenant annually and at the end of the lease term), or landlord may post a surety bond for the amount of the deposit
Amount limits: (no statutory guidelines)
Deadline for return: 1 month
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, cleaning costs, unpaid rent and late fees, unpaid utility bills, unpaid pet fees, or other costs associated with violations of lease terms
Maintenance of funds: Must be put into an escrow account with a state- or federally insured, Georgia-based financial institution, and landlord must inform the tenant about the location of the funds, or landlord may post a surety bond for the amount of the deposit
Amount limits: 1 month’s rent
Deadline for return: 14 days
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, cleaning costs, unpaid rent and late fees, failure to return any keys furnished by the landlord, costs pertaining to breaking the lease early, or other costs associated with violations of lease terms
Maintenance of funds: (no statutory guidelines)
Amount limits: (no statutory guidelines)
Deadline for return: 21 days, or up to 30 days if both parties agree
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, other costs associated with violations of lease terms
Maintenance of funds: (no statutory guidelines)
Amount limits: (no statutory guidelines)
Deadline for return: 30 days if landlord intends to make deductions, and 45 days if landlord intends to return it in full
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, cleaning costs, unpaid rent, unpaid utility bills, or other costs associated with violations of lease terms
Maintenance of funds: Landlords with 25 or more units in the same building or complex must pay interest on deposits held for more than 6 months, payable to the tenant within 30 days of the termination of a 1-year lease
Amount limits: (no statutory guidelines)
Deadline for return: 45 days
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, unpaid rent, unpaid utility bills, last month’s rent (if agreed to by both parties), or other costs associated with violations of lease terms
Maintenance of funds: (no statutory guidelines)
Amount limits: 2 month’s rent
Deadline for return: 30 days
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, unpaid rent, costs associated with gaining possession of unit that tenant has refused to surrender, or other costs associated with violations of lease terms
Maintenance of funds: Deposits must be placed in a dedicated account with a financial institution (any accrued interest is the property of the landlord)
Amount limits: 1 month’s rent if unfurnished, 1 1/2 months’ rent if furnished, and an additional 1/2 month’s rent for pets
Deadline for return: 30 days
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, unpaid rent, or other costs associated with violations of lease terms
Maintenance of funds: Must be held in a dedicated account in a federally insured financial institution (any accrued interest is the property of the landlord)
Amount limits: No statutory limits, but before collecting a deposit, the landlord must provide the tenant with a list of pre existing damages and inform them of their right of inspection
Deadline for return: 30 days, or up to 60 days if tenant disputes deductions
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, unpaid rent, or other costs associated with violations of lease terms
Maintenance of funds: Must be held in a dedicated account in a state- or federally insured financial institution (landlord must inform the tenant of the name and address of the financial institution, and the account number)
Amount limits: (no statutory guidelines)
Deadline for return: 1 month
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, unpaid rent, unpaid utility bills, or other costs associated with violations of lease terms
Maintenance of funds: (no statutory guidelines)
Amount limits: 2 month’s rent
Deadline for return: 30 days if there is a written/signed rental agreement, and 21 days for tenancy-at-will
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, unpaid rent, or other costs associated with violations of lease terms
Maintenance of funds: Must be kept in a dedicated bank account that is safe from their creditors (in the event of a foreclosure or other such action), and landlord must provide tenant with the name of the financial institution where the deposit is located and the account number if asked
Amount limits: 2 months’ rent
Deadline for return: 45 days
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, unpaid rent, or other costs associated with violations of lease terms
Maintenance of funds: Deposits must be placed in a dedicated account within 30 days of their receipt (all deposits exceeding $50 must be placed in an account that bears at least 3% annual interest, accruing every 6 months), held as a certificate of deposit at a financial institution, or landlord may post a surety bond for the amount of the deposit
Amount limits: 1 month’s rent
Deadline for return: 30 days
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, unpaid rent, unpaid water bills, or unpaid real estate taxes the tenant was required to pay (per the lease agreement)
Maintenance of funds: Must be placed in a dedicated, interest-bearing account in a Massachusetts-based financial institution, and accrued interest must be paid to the tenant annually (either 5% or the bank’s interest rate)
Amount limits: 1 1/2 months’ rent
Deadline for return: 30 days
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, unpaid rent, unpaid utility bills, or other costs associated with violations of lease terms
Maintenance of funds: Must be placed in an escrow account or held as a surety bond
Amount limits: (no statutory guidelines)
Deadline for return: 3 weeks after tenant receives forwarding address
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, unpaid rent, or other costs associated with violations of lease terms
Maintenance of funds: Must be placed in an interest-bearing (at least 1%) account
Amount limits: (no statutory guidelines)
Deadline for return: 45 days
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, cleaning costs, unpaid rent, or other costs associated with violations of lease terms
Maintenance of funds: (no statutory guidelines)
Amount limits: 2 months’ rent
Deadline for return: 30 days
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, unpaid rent, or other costs associated with violations of lease terms
Maintenance of funds: (no statutory guidelines)
Amount limits: (no statutory guidelines)
Deadline for return: 30 days, or 10 days if landlord does not intend to make any deductions
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, unpaid rent and late fees, charge for the landlord’s labor, unpaid utilities, or other costs associated with violations of lease terms
Maintenance of funds: (no statutory guidelines)
Amount limits: 1 month’s rent, plus an additional quarter-month’s rent as a pet deposit
Deadline for return: 14 days
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, unpaid rent, or unpaid utilities
Maintenance of funds: (no statutory guidelines)
Amount limits: 3 months’ rent for private housing, and 1 month’s rent for public housing (tenant’s have the option of taking out a surety bond instead if both parties agree)
Deadline for return: 30 days
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, unpaid rent, or cleaning costs
Maintenance of funds: (no statutory guidelines)
Amount limits: 1 month’s rent, unless it is a shared facility—such as a boarding house—in which case there is no limit
Deadline for return: 30 days, or 20 days if no written agreement
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, unpaid rent, unpaid taxes, or other costs associated with violations of lease terms
Maintenance of funds: Must be held in a dedicated account in a bank located in New Hampshire, and must provide information about the funds (bank, account number, interest rate, etc.) upon tenant’s request
Amount limits: 1 1/2 months’ rent, and landlord may increase deposit if rent is increased (but no more than 10% in a given year)
Deadline for return: 30 days
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, or unpaid rent
Maintenance of funds: Must be placed in a money market fund in a New Jersey-based investment company, or in an interest-bearing bank account (if landlord owns 10 or more units, the interest rate must be equal to or greater than the interest rate for the bank’s money market accounts); tenant must be paid interest on deposit annually
Amount limits: 1 month’s rent for leases less than 1 year; for leases of 1 year or more, either 1 month’s rent or any amount greater than that if it’s in an interest-bearing account and the tenant is paid the interest annually
Deadline for return: 30 days
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, unpaid rent, unpaid utilities, or other costs associated with violations of lease terms
Maintenance of funds: If charging more than 1 month’s rent as a deposit, it must be put into an account that earns an interest rate equal to or greater than the passbook interest rate on New Mexico savings accounts
Amount limits: 1 month’s rent, unless it is subject to the City Rent and Rehabilitation Law or the Emergency Housing Rent Control Law
Deadline for return: 14 days
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, unpaid rent, or other costs associated with violations of lease terms
Maintenance of funds: Must be kept in a dedicated savings account based in New York, and must earn the average interest rate in the area if landlord owns rental property with 6 or more units (landlord may keep an annual fee of up to 1% of the deposit amount, and the tenant is paid the rest of any accrued interest annually)
Amount limits: 2 weeks’ rent for week-to-week, 1 1/2 months’ rent for month-to-month, 2 months’ rent for rentals exceeding 2 months, and a “reasonable, non-refundable” pet deposit (no specific limit)
Deadline for return: 30 days, or 60 days (total) if a dispute over deductions extends beyond 30 days
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, unpaid rent, unpaid utilities, breach of lease agreement, court costs, costs of removing tenant’s possessions after eviction, costs of re-renting the unit after a breach, or other costs associated with violations of lease terms
Maintenance of funds: Must be kept in a trust account in a North Carolina-based financial institution, or landlord may post a bond for the same amount with a company that has a North Carolina business license
Amount limits: 1 month’s rent, additional pet deposit of up to $2,500 or 2 months’ rent (whichever is greater), and up to 2 months’ rent for tenants with felony convictions
Deadline for return: 30 days
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, unpaid rent, or cleaning costs
Maintenance of funds: Must be kept in a dedicated interest-bearing savings account (accrued interest is payable to the tenant after 9 months)
Amount limits: No limit, but deposits greater than 1 month’s rent must bear interest at or greater than 5% if tenant remains on the property for 6 months or more (accrued interest is payable to the tenant annually)
Deadline for return: 30 days
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, or unpaid rent
Maintenance of funds: No requirements, unless deposit is greater than 1 month’s rent, in which case it must be placed into an interest-bearing account
Amount limits: (no statutory guidelines)
Deadline for return: 45 days
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, unpaid rent, or other costs associated with violations of lease terms
Maintenance of funds: Must be kept in an escrow account in a federally insured financial institution based in Oklahoma
Amount limits: No limit, but landlord may increase deposit amount within the first year of the lease only if both parties agree to reasonable increases (such as a new pet) in the lease agreement
Deadline for return: 31 days
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, unpaid rent, or other costs associated with violations of lease terms
Maintenance of funds: (no statutory guidelines)
Amount limits: 2 months’ rent for first year, 1 month’s rent for each successive year, and landlord may not increase deposit amount (even if rent has increased) if tenant has rented a given property for 5 or more years
Deadline for return: 30 days
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, unpaid rent, or other costs associated with violations of lease terms
Maintenance of funds: Must be kept in an escrow account in a federally or state-regulated financial institution, or landlord may post a guarantee bond for the amount; landlord must inform tenant of the name and address of the bank and the amount of the deposit
Amount limits: 1 month’s rent
Deadline for return: 20 days
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, unpaid rent, or other costs associated with violations of lease terms
Maintenance of funds: (no statutory guidelines)
Amount limits: No limits, but landlord may charge different deposits for different tenants only if the units are not comparable and must notify all tenants of the discrepancy
Deadline for return: 30 days
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, or unpaid rent
Maintenance of funds: (no statutory guidelines)
Amount limits: 1 month’s rent, but a higher amount may be required if tenant presents “special conditions” that “pose a danger to the maintenance of the premises” (such as a pet)
Deadline for return: 2 weeks, and an itemized accounting of deductions within 45 days if requested
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, or unpaid rent
Maintenance of funds: (no statutory guidelines)
Amount limits: (no statutory guidelines)
Deadline for return: (no statutory guidelines)
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, unpaid rent, or other costs associated with violations of lease terms
Maintenance of funds: Must be kept in a dedicated account in a financial institution regulated by the state or federal government
Amount limits: (no statutory guidelines)
Deadline for return: 30 days, but landlord is not required to return deposit if lease agreement requires written notice of intention to vacate premises and fails to do so
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, or other costs associated with violations of lease terms
Maintenance of funds: (no statutory guidelines)
Amount limits: No limits, and landlord may charge a nonrefundable deposit as long as it’s clearly stated in the lease agreement or another document that is signed by both parties
Deadline for return: 30 days
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, cleaning costs, unpaid rent, or other costs associated with violations of lease terms
Maintenance of funds: (no statutory guidelines)
Amount limits: (no statutory guidelines)
Deadline for return: 14 days, but 60 days if it’s a seasonal rental and not a primary residence
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, unpaid utilities, unpaid rent, or cost of removing items after tenant moves out
Maintenance of funds: (no statutory guidelines)
Amount limits: 2 months’ rent
Deadline for return: 45 days, but deductions must be itemized within 30 days (45 days if charges exceed deposit amount)
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, unpaid utilities, or other costs associated with violations of lease terms
Maintenance of funds: Landlord must keep itemized records of all security deposits
Amount limits: (no statutory guidelines)
Deadline for return: 21 days
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, unpaid rent, or other costs associated with violations of lease terms
Maintenance of funds: Must be kept in a dedicated trust account, a savings account in a state- or federally regulated financial institution, or in an escrow account with an agent based in Washington
Amount limits: (no statutory guidelines)
Deadline for return: 60 days, or within 45 days of occupancy by new tenant (whichever is shorter), and 15 days may be added if damage exceeds deposit amount and requires professional work
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, unpaid rent, unpaid utilities, costs associated with removing items after tenant has vacated property, or other costs associated with violations of lease terms
Maintenance of funds: (no statutory guidelines)
Amount limits: (no statutory guidelines)
Deadline for return: 21 days
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, unpaid rent, unpaid utilities, or other costs associated with violations of terms outlined in a separate Nonstandard Rental Provisions document
Maintenance of funds: (no statutory guidelines)
Amount limits: (no statutory guidelines)
Deadline for return: 30 days if applied to unpaid rent, or within 15 days of receiving tenant’s forwarding address if later than that, and an additional 30 days if deductions are made for damage
Acceptable reasons for deductions: Damage and repairs other than normal wear and tear, unpaid rent, cleaning costs, or other costs associated with violations of lease terms
Maintenance of funds: (no statutory guidelines)
*Information gathered from Rocket Lawyer
How to Write a Security Deposit Return Letter
When writing a security deposit letter, start by detailing the amount being returned, any deductions, and the reasons for those deductions. If you’ve made repairs, include photocopies of receipts so everything is transparent. List the cleaning, repairs, and any other deductions within the letter to keep everyone on the same page and avoid confusion. Here is a security deposit return letter sample of items to include:
-
Header:
Your name, address, and contact information.
-
Date:
Current date
-
Tenant information:
Name, address, and contact information
-
Greeting:
Begin with “Dear _____ (tenant name)”
-
Opening:
The letter aims to discuss the security deposit return
-
Deposit details:
Amount of original deposit, when it was received, and amount deducted
-
Itemized deductions:
Bullet list of itemized deductions
-
Calculation of refund:
Starting balance, minus deductions
-
Method of payment and timeline:
Check, direct deposit, or other method and when the deposit will be returned if it is not enclosed.
-
Final remarks:
Keep it positive. Express appreciation for their cooperation.
-
Closing and signature:
“Sincerely,” Yours truly,” and your written or electronic signature
-
Enclosures:
Copies of receipts and invoices, if applicable.
-
Tenant signature line:
Tenant sign and date, acknowledging receipt of the letter.
Ensure you have your tenant’s updated contact info before they move out so you can quickly get their security deposit back to them. If you’re sending a check, go for a cashier’s check, and don’t forget to include a receipt for your records. It’s wise to keep photocopies of the letters, checks, and receipts since the originals can fade over time. These copies will come in handy for taxes and any disputes. Remember to communicate in a friendly and straightforward way to keep things positive and avoid misunderstandings.
How to Send Security Deposit Refund Letters
It’s best to send the security deposit request letter using certified mail with a return receipt, which the tenant needs to sign. That way, you can confirm they got the letter. You could also email it, just in case. To send the return of a security deposit form through the mail, just follow these steps:
- Fill out our free security deposit return template.
- Put everything in the envelope and bring it to your local post office.
- The postmaster will provide a certified return receipt label.
- Fill out the required information on the label and send.
- Keep a copy of the postage receipt for your taxes.
Just a quick heads-up—depending on where the letter is heading, it might take multiple days for the tenant to receive it. Keep this in mind when figuring out the return deadline required by your state. Once the tenant gets the letter, the post office will send the signed return receipt back to you for your records.
Consider using online rent payment services to make collecting rent, fees, and security deposits a breeze. With Baselane, you’ll have a handy tenant page to keep track of current and former tenant records. Tenants will love having their portal to check their rent status, view payment history, and get friendly reminders when it’s time to pay. Plus, you’ll see payments in your bank account within two to three days, and landlords and tenants benefit from those helpful auto-reminders.
Pro Tip: Managing many properties can be tedious when sending out all those letters. Online property management software with client relationship management (CRM) features or a direct mail service can reduce the hassle. Many let you upload and tweak templates with your style and add your tenants’ contact info. Plus, some mail services also send out your security deposit return letters.
Collecting & Returning Security Deposits Tips
It’s essential to sort everything out at the start of a rental by laying down clear rules for handling security deposits. Snap some photos of the place before renting it out so you’ll know the difference between normal wear and tear and actual damage. Here are some extra tips to help avoid conflicts, property damage, and legal headaches.
| Provide clear security deposit terms in the lease. | The lease must specify the deposit amount, due date, and how it is returned. |
| Screen tenant-applicants thoroughly. | Screening tenants and running complete background checks can reduce the risk of renting to less-than-ideal tenants. |
| Take comprehensive photos of the unit with date/time stamps before tenancies begin | Landlords can avoid conflict if they have complete images of the unit’s condition before the tenant moves in. |
| Provide a Statement of Condition checklist. | The tenant inspects the unit at the beginning of the lease period and documents any existing deferred maintenance within a specified period (say, ten days) before renting. Both the landlord and tenant agree and sign. |
| Include a security deposit statement or receipt. | Include the amount of the deposit collected, the bank name, address, and escrow account number. State how the interest income is managed and the timeframe for the deposit is returned. |
| Deduct only what is allowable by your state. | The security deposit is the tenant’s money. Only remove what your state allows and where applicable. |
| Conduct a tenant move-out walkthrough. | Before returning the deposit, conduct a final walkthrough, preferably with the tenant, and collect the keys. |
| Take move-out photos. | Take move-out photos with dates and timestamps to compare with move-in pictures in the event of a dispute. |
Learn the difference between normal wear and tear vs property damage and download our free move-in and move-out checklist in our article, Normal Wear & Tear vs Property Damage Guide (+ Checklist) – The Close.
Allowable Deductions From a Security Deposit
Landlords cannot withhold the entire security deposit for repairs beyond normal wear and tear. They can only retain costs for necessary repairs or unpaid rent, but not for routine rental maintenance or personal issues. Documentation like receipts is required for any deductions. If repair costs and lost rent exceed the deposit, the landlord must take legal action to recover the difference. They deduct costs and return the remaining deposit with interest if costs are lower. Complete documentation is required in both cases.
Here are some common allowable security deposit deductions:
- Unpaid rent and fees: Security deposits may be used to cover unpaid rent and late fees but must be specified in the lease agreement before signing.
- Cleaning costs: A unit should be left in “broom swept” condition, meaning it is tidy and without unusual dirt, filth, or trash left behind. It should look the same as when you rented it, minus any minor wear and tear.
- Repairs for damage: Torn screens, broken windows, scribbling on walls, and things like broken appliances or anything beyond normal wear.
- Missing items: These may include appliances, light fixtures, ceiling fans, cabinetry and hardware, and window air conditioners. When leasing a unit, always have a list of items included and written into your lease, and ensure they’re in working order.
- Repainting: If there is scribbling on the walls, damage, or the tenant repainted with an unusual color without your written consent, and the damage is beyond simple scuffs or dirt, you may be able to deduct the painting cost. This is an area where you must proceed with caution and verify. Ensure your lease clarifies whether tenants can paint, put nail holes in walls, or change colors.
- Pet damage: These are repairs or cleaning because of pet-related damages. If the lease allows pets and specific pet-related terms are violated, or if pets are not allowed, you may be able to use the deposit for repair.
- Abandoned property: Includes costs to remove and dispose of any personal property left behind by the tenant after move-out.
- Restoration: Reverting any changes made by the tenant that weren’t permitted, such as unauthorized alterations.
When it comes to deductions, they should be fair and clearly documented. Landlords must give a detailed breakdown of the deductions and their costs in many places. Also, deductions should cover actual expenses and not be a way to make money off the security deposit. Getting familiar with local rules and regulations is a good idea, as well as chatting with legal experts or property managers to ensure your deductions are on the right side of the law.
Frequently Asked Questions (FAQs)
What is the difference between a security deposit and last month’s rent?
A security deposit is money paid by the tenant upfront to cover potential damages or unpaid rent. It’s refundable, with deductions for actual damages if they occur. Last month’s rent is an advance payment for the final month of the lease, nonrefundable, and used as part of the rent. The security deposit safeguards against damages, while last month’s rent is applied to the final month’s rent obligation.
Is it worth it to collect a security deposit?
When it comes to real estate investing, collecting a security deposit from your tenants at the start of their lease is a smart move. Even the best tenants can face unexpected challenges—like job changes or accidents—which can sometimes lead to late rent payments. Setting up an escrow account may feel like an extra step, but it’s worth it! It helps protect you and your tenants from potential damages or unpaid rent. Plus, it adds a little extra peace of mind for everyone involved.
Bringing It All Together
A security deposit return form is essential when wrapping up a lease agreement. It’s your official way to let the tenant know what’s up with their deposit. This form breaks down how much cash they’re getting back, if there are any deductions for damages or missed rent, and when they can expect their refund. Check out the deposit return letter sample we shared—it’s all about keeping things clear and friendly, helping you dodge any awkward disputes, and keeping those good vibes flowing between landlords and tenants!
If you’ve got any thoughts or experiences with creating a tenant deposit return letter, drop a comment below—we’d love to hear from you!
Add comment