Collecting a security deposit from tenants before move-in is the right move. A security deposit assures you, the landlord, that the tenant will pay rent on time and abide by the lease. After all, security deposits are refundable, so tenants will be less likely to break the lease if there is a refundable deposit on the line. But what happens if the tenant does break the lease in one way or another? What if there is damage to the property or rent left unpaid after the tenant moves out, and the security deposit isn’t enough to cover it?
Communicate with Your Tenant
If you plan to withhold the security deposit from your tenant, you will need to send a letter to your tenant explaining the situation. This may vary state to state, so be sure to check your local laws to see if and when you need to send the letter.
Be sure to send an itemized security deposit deduction form to show your tenant the itemized list of deductions for property damage and cleaning fees. This way, your tenant will have a clear understanding of exactly why they will not be receiving their full deposit back and what each repair costs. If the tenant still owes you money beyond the security deposit, you will need to consider sending a demand letter for damages.
Send a Demand Letter
After you’ve sent the itemized deduction form, you should consider sending a letter asking for payment from the tenant (for the amount beyond that of the security deposit), which is known as a demand letter. A demand letter should be formatted as follows:
[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 [total deposit amount] for the property located at [property address] during your lease period of [start and end dates].
As your former landlord, I will not be returning your security deposit for the property located at [property address]. I will be keeping the security deposit to cover the cost of the following:
[Include itemized deduction form]
The total cost to cover these damages is ___.
Because the cost of damages exceeds the security deposit, you owe me ___, which represents total damages minus the security deposit, payable immediately.
Please send your balance to:
[Your Full Name and Address]
Sincerely,
[Your Signature]
[Your Full Name]
Consider Small Claims Court
If your demand letter for damages (or unpaid rent) exceeding the security deposit is a success, you will receive the money owed to you. But if things don’t go as planned, try sending the letter a second time, attaching the first letter with it. If there is still no response or payment from the tenant, it’s time to decide if it’s worth it for you to take your tenant to small claims court.
If you win a judgment against your tenant in small claims court, you will get the money owed to you. However, there are some downsides to this scenario:
It’s time consuming
To go to small claims court, you will have to prepare a case, organize your evidence, research the process, and attend the hearing in the town your rental property is located. To file a case with small claims court, you will have to pay a small filing fee (usually less than $100). If you lose the case, you will also lose the filing fee.
Your tenant may not have the funds
If you win a judgment, you will still need to collect the money. If your tenant does not have the funds to pay for the money owed to you, you won’t be able to collect, and you will have to continue the case or wait for funds to be available.
There’s a lack of evidence
If you did not properly collect evidence in regards to how your property looked before the tenant moved in and how it looked after the tenant left, your chance of winning small claims court will suffer.
A potential countersuit with tenant
If you haven’t done everything by the book, you may end up owing your tenant money — if they file a countersuit against you. However, if you have played by the rules and believe you have a fair chance of winning the case, you should consider going to small claims court.
Prevent Excessive Damages Throughout Lease
Property damage and unpaid rent are two phrases no landlord wants to hear. However, if you’d like to avoid these negative scenarios and the possibility of going to small claims court, try preventing excessive damages before your tenant moves in and throughout their lease.
Regular inspections
By conducting regular inspections of your property, you will be able to monitor the property’s condition and the tenant’s treatment of said property. It’s important to stay on top of the situation, while also respecting your tenants and their privacy. Inspecting your property twice a year or quarterly is your best bet for preventing damage to the property. If you notice pet stains, a foul odor, wall damage, etc. in the unit during your inspections, you can handle the minor issue before it becomes an expensive problem.
Be sure to mention biannual or quarterly inspections in the lease, and give the tenant at least a few days’ notice before inspecting the property.
Walk-throughs a month before move-out
It’s proper procedure to do a walk-through of the property before the tenant moves out or immediately after they’ve moved out. This is the time where you will take note of any damages to the unit that will require funds to be taken out of the security deposit.
If you prefer, you can do a walk-through a month before your tenant moves out. At this time, you can go over any items that need fixing with your tenant. They will have the opportunity to fix any of the problems mentioned before they move out in order to get their security deposit back in full.
Properly screen tenants
The best way to avoid unpaid rent and damage to your property is to screen your tenants properly. Screening doesn’t guarantee a perfect landlord/tenant relationship, but it will help you immensely. Apartments.com makes it easy to screen tenants, get the information you need, and find a qualified renter fast. Unlike our competitors, who use various third-party resources to collect information, we partner with TransUnion to provide you with screening reports for evictions, credit, and criminal history. Another feature you’ll find only on Apartments.com is support for co-signers, guarantors, and co-applicants. If you need more information to make a decision, you can request supporting documents from potential tenants directly on our platform. Get all the information you need to find the right tenant quickly and easily.
Repairing damages in your property due to a tenant’s negligence will cost you. You will have to pay for cleaning and repairs until the tenant pays you back — whether through a demand letter or small claims court. Depending upon the severity of the damage and the time it takes to repair, you may not be able to rent out the unit for a few weeks to a few months. By taking precautionary steps to prevent property damage and unpaid rent, you will save yourself time, money, and energy in the long run. Best of luck, landlords.
