Landlords typically collect a security deposit when a tenant moves in. But what should landlords do with that money when a tenant moves out? Hopefully, all went well and you'll return the security deposit when the lease is up. In some cases, however, you may keep a portion or all of the security deposit to cover damages or unpaid rent.
A security deposit is a sum of money—usually equal to one month’s rent—that a tenant gives to a landlord before moving in. Tenants get their security deposit back when they move out and if they return the rental in the same condition as when they moved in (minus normal wear and tear).
Returning a security deposit is part of your duties as a landlord. That’s the mindset you should have, as the security deposit is really the tenant’s money that you’re merely holding during the tenancy.
But landlords can choose not to return a security deposit for the following reasons:
- To repair damage the tenant (or their guests) caused
- For cleaning (This applies to getting the rental back to the same condition as it was in at move-in. This does not apply to routine cleaning to ready the place for the next tenant.)
- To cover any unpaid rent
Pro tip: Both landlords and tenants should take photos or video of the rental before move-in and at move-out. This provides proof of the condition of the unit before and after a tenant’s stay.
Track Expenses with Apartments.com
Being a landlord means dealing with bookkeeping. Whether it’s receipts for repairs or documenting income or security deposits, keeping everything organized for tax season can be a headache. Luckily, Apartments.com has a great solution. Our expense tracking platform helps you summarize rental expenses by property and tax category. From there, you can easily export them to CSV or PDF formats to make doing your taxes a breeze. Unlike our competitors, there’s no need to go off-site to a third party for required forms. With Apartments.com, you can download the required tax filing forms directly from your account, and they are backed up for seven years.
Why a Letter to Return a Security Deposit?
If you will not be refunding any or all the security deposit, you need to send a letter to your tenant’s new address explaining why, along with any remaining security deposit money. If you will be returning the entire security deposit, you can just send the money. But you can accompany the security deposit returned with a letter, as well.
Pro tip: Send the security deposit and/or letter certified mail. That way, you’ll have proof you did what you were supposed to do.
If your tenant didn’t leave a forwarding address, contact them to find out where to send the money and/or letter.
What if You Have No Forwarding Address?
You might not be able to get a forwarding address, maybe because your tenant knows they won’t be getting back a security deposit. You still need to send a letter explaining the reason.
If you have no forwarding address, mail the letter to the tenant’s last known address, which is your rental property. If you don’t do things by the book, your tenant could sue you for not following the security deposit rules for your state.
Sample Letter One — Letter to Return the Security Deposit
[Date]
[Tenant’s name]
[Tenant’s new address]
Re: Return of security deposit
Dear [tenant’s name],
This letter concerns your security deposit in the amount of [amount of the total deposit] for the premises located at [address of the property] during your lease period of [start and end dates].
I’m including your entire security deposit along with this letter.
It was a pleasure having you as a tenant. I wish you the best of luck for the future.
Sincerely,
[Your name]
[Your signature]
Note: Attach a check for the total amount of the security deposit.
Pro tip: If you treat your tenants fairly, they may rent from you again.
Sample Letter Two — Letter of Security Deposit Partial Refund
[Date]
[Tenant’s name]
[Tenant’s address]
Re: Return of security deposit
Dear [tenant’s name],
This letter concerns your security deposit in the amount of [amount of the total deposit] for the premises located at [address of the property] during your lease period of [start and end dates].
I am deducting X from the security deposit to cover the following:
[Include an itemized list with the amount(s) you are withholding. (Example: Dented garage door—$130.) Other examples include past rent, late fees (if they were specified in the lease), cleaning fee, carpet cleaning or replacement, painting, new window coverings, or anything else that was damaged by the tenant or their guest.]
The remaining balance of the security deposit is X. I am returning that amount along with this letter.
I wish you the best of luck for the future.
Sincerely,
[Your name]
[Your signature]
Note: Attach a check for the amount of the security deposit minus the money you’re keeping for damages. Also include receipts, invoices, or bills for work done.
Sample Letter Three — Not Refunding the Security Deposit Letter
[Date]
[Tenant’s name]
[Tenant’s address]
Re: Return of security deposit
Dear [tenant’s name],
This letter concerns your security deposit in the amount of [amount of the total deposit] for the premises located at [address of the property] during your lease period of [start and end dates].
I will not be returning your security deposit for the premises located at [address of the property]. I am keeping the security deposit to cover the following:
[Include an itemized list with the amount(s) you are withholding. (Example: Failure to pay last months’ rent—$X.) Other examples include late fees (if they were specified in the lease), cleaning fee, carpet cleaning or replacement, painting, new window coverings, or anything else that was damaged by the tenant or their guest.]
The total cost to cover these damages is X.
I wish you the best of luck for the future.
Sincerely,
[Your name]
[Your signature]
Note: To withhold all the security deposit, the amount you're withholding must be the same as the security deposit or more. Include receipts, invoices, or bills for work done.
Sample Letter Four — Not Refunding Security Deposit with Request for Payment Letter
[Date]
[Tenant’s name]
[Tenant’s address]
Re: Return of security deposit
Dear [tenant’s name],
This letter concerns your security deposit in the amount of [amount of the total deposit] for the premises located at [address of the property] during your lease period of [start and end dates].
I will not be returning your security deposit for the premises located at [address of the property]. I am keeping the security deposit to cover the following:
[Include an itemized list with the amount(s) you are withholding. (Example: Failure to pay last month’s rent—$X, Dented garage door—$130, etc.) Other examples include late fees (if they were specified in the lease), cleaning fee, carpet cleaning or replacement, painting, new window coverings, or anything else that was damaged by the tenant or their guest.]
The total cost to cover these damages is X.
Because the cost of damages exceeds the security deposit, you owe me X, which represents total damages minus the security deposit, payable immediately.
Please remit your balance to:
[Your name and address]
Sincerely,
[Your name]
[Your signature]
Pro tip: If you don’t receive the money your tenant owes you in a reasonable amount of time, you’ll need to decide whether you will take them to small claims court.
The Bottom Line on Security Deposits
When it comes to the security deposit, you need to do everything by the book.
If you don’t return the security deposit within the allotted time for your state, or if you hold all or part of the security deposit without a letter, an itemized list, and receipts, your tenant could sue you. Depending on your location, if you did not follow the law and the tenant wins in court, you might need to pay double or even treble damages.
So handle the security deposit the right way.
