There comes a point in every lease where you must decide the fate of your tenant’s security deposit. Ideally, your tenant adhered to their lease, cared for the property, and put themselves in good standing for a full refund. However, there may be instances where you deduct from the deposit or withhold it altogether.
Whether you’re issuing a full refund, a partial refund, or zero refund, it’s important to communicate with your tenant clearly and professionally. The best way to do this is to provide a written statement outlining the specifics of their deposit and reasons for potential deductions or withholdings. This is what’s known as a security deposit return letter.
In this article, we’ll walk you through how to write a security deposit refund letter. In doing so, we’ll provide free letter templates and explore the following topics:
- How to decide whether to withhold or refund a security deposit
- The importance of writing a security deposit return letter
- How to write a letter to refund a security deposit
Refund vs. Withhold: Which Option Should You Choose?
Before you can send your security deposit refund letter, you must first decide whether to refund or withhold the deposit. This decision should not be taken lightly, as it could have financial and legal implications for your rental business. So, before you put your decision in writing, consider the following factors:
Lease compliance
The first question to ask when evaluating a security deposit refund is, did the tenant adhere to the terms of their lease agreement? If the answer is yes, you’ll probably feel more confident returning the security deposit in full. However, if the answer is no, you should consider the significance of their lease violation. If they were late on rent once or twice, you may be able to overlook it. But, if they consistently paid late or damaged the property, you may need to withhold some or all of their deposit.
Property condition at move-out
Property condition is often the deciding factor with security deposits. During your move-out inspection, you should note any property damage that goes beyond normal wear and tear. Examples of this might be large holes in the wall, stubborn carpet stains, or broken appliances. If the tenant is responsible for these damages, you can deduct from the security deposit to cover repair costs. However, if all you find is normal wear and tear, like peeling paint or slight scuff marks, it’s best to return the deposit in full.
State and local laws on security deposits
Lastly, consider your state laws before solidifying your security deposit decision. Depending on where you live, you may be subject to stringent policies like refunding the deposit within a certain timeframe or providing an itemized list of deductions. To ensure compliance, review these laws before issuing your letter. Otherwise, you could face some legal backlash.
The Importance of Writing a Security Deposit Return Letter
If you’re a first-time landlord, you may ask, is a letter necessary? Wouldn’t a text suffice? Or why not have a face-to-face discussion? Though it might not be what you want to hear, yes, a security deposit return letter is necessary for a few reasons.
Firstly, sending a refund letter protects you from any potential legal claims or allegations. In case your tenant claims unfair withholdings, you can reference the letter and its content as proof of your decision-making process. If you’ve written it correctly, your letter should state how much was returned/withheld and clearly justify your decision. This documentation will protect you should issues arise.
Secondly, issuing a letter reflects well on your rental business. While a brief text or a quick phone call may seem more personal or convenient, a formal letter showcases professionalism and commitment to your rental business. It also shows that you respect and prioritize your landlord-tenant relationship, even if it’s about to come to an end.
What if my tenant didn’t provide a forwarding address?
After writing your refund letter, you might realize that you don’t know where to send it. If your tenant moved out without providing a forwarding address, send the security deposit return letter to their last known address. Even if that address is your rental property, still send the letter to ensure full legal compliance. It’s also a good idea to send the letter via certified mail with the return receipt requested. This will provide proof that you made an effort to contact your tenant and return their deposit.
How Do I Write a Letter to Refund a Security Deposit?
Now that you have some background on security deposit refunds, it’s time to write your letter! Whether you’re refunding the deposit in full, partially, or not at all, your letter should be clear, to the point, and professional. To help you get started, we’ve provided some security deposit return letter templates below.
Security Deposit Receipt Template #1 — Full Refund of Security Deposit
[Property address]
[City, State, Zip]
[Date]
Dear [tenant’s name],
We are reaching out to you today regarding your security deposit in the amount of [Total Deposit Amount] for your lease at [Property Address] that ended on [Lease End Date].
A check for your entire security deposit is included with this letter.
It was a pleasure having you as a resident. We wish you the best of luck moving forward
Sincerely,
[Your signature]
[Your full name]
[Your phone number or email]
Note: Download our Security Deposit Refund Template free.
Security Deposit Receipt Template #2 — Partial Refund of Security Deposit
[Property address]
[City, State, Zip]
[Date]
Dear [tenant’s name],
We are reaching out to you today regarding your security deposit in the amount of [Total Deposit Amount] for your lease at [Property Address] that ended on [Lease End Date].
We are deducting [Amount] from your security deposit to cover the following:
[Itemized List of Damages]
A check for the remaining balance of your security deposit is included with this letter. Should you have any further questions regarding the contents of this letter, please do not hesitate to reach out.
Sincerely,
[Your signature]
[Your full name]
[Your phone number or email]
Note: Download our Security Deposit Partial Refund Template free.
Security Deposit Receipt Template #3 — No Refund of Security Deposit
[Property address]
[City, State, Zip]
[Date]
Dear [tenant’s name],
We are reaching out to you today regarding your security deposit in the amount of [Total Deposit Amount] for your lease at [Property Address] that ended on [Lease End Date].
Your entire security deposit is being withheld to cover the following:
[Itemized List of Damages]
The total cost to cover these damages is [Total Amount]. Should you have any further questions regarding the contents of this letter, please do not hesitate to reach out.
Sincerely,
[Your signature]
[Your full name]
[Your phone number or email]
Note: Download our Security Deposit Withholding Template free.
Security Deposit Receipt Template #4 — No Refund of Security Deposit with Request for Payment
[Property address]
[City, State, Zip]
[Date]
Dear [tenant’s name],
We are reaching out to you today regarding your security deposit in the amount of [Total Deposit Amount] for your lease at [Property Address] that ended on [Lease End Date].
Your entire security deposit is being withheld to cover the following:
[Itemized List of Damages]
The total cost to cover these damages is [Total Amount].
Because the cost of damages exceeds your security deposit amount, you now owe [Amount], which represents total damages minus your deposit, payable immediately.
Please remit your balance to: [Your Full Name and Property Address]
Sincerely,
[Your signature]
[Your full name]
[Your phone number or email]
Note: Download our Security Deposit Request for Payment Template free.
Manage Security Deposits with Apartments.com
When it comes to refunding security deposits, you need to do everything by the book. This means understanding your state and local laws, keeping meticulous records, and communicating with your tenant professionally. If that sounds like a lot, don’t worry! Apartments.com has got you covered.
With an extensive suite of Rental Tools, Apartments.com can help you navigate all areas of property management, including handling security deposits and refunds. Need help writing a security deposit clause for your lease? Use our Lease Agreement Generator to ensure attention to detail and compliance. Looking to organize your records and receipts? Track expenses with ease using our Expense Tracking Platform. Whatever your property management needs, Apartments.com has the tools to help.
This article was originally published on September 25, 2019, by Laura Agadoni.
FAQs
What is the procedure for refunding a security deposit?
The procedure typically involves the landlord inspecting the property for damages after the tenant moves out. If the property is in good condition and meets the lease terms, the landlord returns the deposit, often within 30 days. If the property needs significant repairs, the landlord may deduct from or withhold the security deposit entirely. However, any deductions or withholdings should be itemized and communicated to the tenant in writing.
How to write a letter to refund a deposit?
Start by addressing the tenant by name and stating the purpose of the letter. Include details about the amount of the security deposit and when it needs to be paid. If returning the full deposit, state that straightforwardly, express any well wishes for the future, and include a check for the refund. If withholding or deducting from the deposit, provide an itemized list of damages and their corresponding costs. It's also crucial to reference any relevant state laws regarding security deposits.
Is it illegal for landlords to refuse to return security deposits?
It is illegal for landlords to withhold security deposits without a valid reason, such as unpaid rent or property damage. Laws vary by location, but landlords are generally required to provide an explanation and documentation for any deductions. Tenants can take legal action if the deposit is wrongfully withheld.
