The Security Deposit Conundrum

Although most residents are willing to pay a security deposit at the beginning of their residence, during move-out time clients often expect the deposit to be refunded in full, regardless of the amount of damage they’ve caused to the unit. In fact, the most frequent court case when it comes to property management is over the return of the deposit! Luckily, there are several steps property managers can take to ensure that all parties are on the same page:

1) Allow your resident to review the initial inspection report. This gives your clients the opportunity to point out anything pre-exisiting that could be charged against them at the end of the lease. For example, perhaps there is a dent in the wall from the bedroom doorknob that you overlooked during your own walk through. Make note of this on the reisdent’s lease so they can’t argue at the end of their stay that it’s unfair to bill them for damage that was not their doing.

2) Make copies of the lease and the inspection report. It may be an obvious practice, but both you and your client should have a copy of the results of the inspection as well as the resident’s lease. That way, (s)he can reference property policies and the terms of the lease at any point during his/her stay, and knows the security deposit process.

shutterstock_20420335-resized-6003) Ask the resident  to sign off on the final inspection paperwork. Give your client time to review the document, but set a hard return date, such as within one week of sending the file. If the client refuses to sign off on the paperwork, make a note of it and save the communications – that way, if you do end up in a legal dispute, you have evidence that you are following the procedure that was agreed upon at the beginning of the lease.

4) Take lots of pictures. In this day and age, even mobile phones have cameras, making it easy to detail every area of the apartment. Take a photo of anything damage-related that the resident may push back on, as well as any lease violations that you notice (is the carpet covered in dog-hair at a pet-free complex? Does the unit smell like smoke even though cigarettes cannot be enjoyed indoors?).

5) Save your receipts. If any extra work has to go into the apartment during the turnover process, save the bill so you can justify depleting your clien’ts deposit refund. Did you have to paint the ceilings and walls 3 times to get rid of the cigarette smoke discoloring? Did a professional carpet cleaner have to scrub the dining room because someone knocked what appears to be spaghetti sauce on the floor? Save the proof of these extra costs so your resident doesn’t feel that you’re keeping some of their deposit to  increase your profit and instead recognizes the need for a pro-rated refund.

6) Define “normal wear and tear” from the get go. Most leases have a stipulation that clients will not be charged for issues that are bound to occur while living in an apartment. However, it is imperative to define what is “expected” wear and tear versus “abnormal” to avoid a squabble over minor marks and dents when the resident is moving out.

Do you have any other security deposit tips? Share them below!


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