Refunding the security deposits. Mostly.


Tonight I figured out what I was taking out of my departing tenants’ security deposits. Since I also live in the duplex that I rent out, I get to know my tenants quite well, and become friendly with them. Friendly enough that I feel guilty for not refunding their security deposits 100%. But I have to remind myself that I’m running a business here.

THE RULES
Most states have some degree of legislation regarding the return of security deposits. In many states, the security deposit must be returned to the tenant within 14 days; others have 21 or 30 day laws. Some states require the money to be kept in a separate account for the duration of the lease term, and some require that the landlord pay the tenant interest on the amount. Also, many states have a statutory limit on the amount of money that can be collected as a security deposit at the beginning of the lease; if such a limit exists, it is generally one to two months rent.

THE EASY THINGS TO FIGURE OUT
One year my tenants were averse to using a shower curtain properly, and caused a reasonable amount of water damage to the lower unit’s ceiling. After they moved out, I hired a contractor to fix the ceiling, and simply charged the tenants what the contractor billed me. Things like missing blinds and switchplates are also easy to figure out – I simply bill what the supplies cost me, plus a small amount for my time.

THE LESS EASY THINGS TO FIGURE OUT
How much do I charge for an excessive amount of scratches on a newly refinished hardwood floor? Paint on woodwork? The scratches on the floor, an amount above normal wear-and-tear have to be accounted for, but I obviously can’t charge the amount that refinishing the floors would cost. While the paint on the woodwork isn’t bad enough for me to actually go through the trouble of removing it yet (goof off and some elbow grease usually does the trick), it’s still damage to the 100 year old woodwork. I haven’t figured out a good scientific way to charge for things like this, other than to just pull a number out of my head that seems reasonable. For the hardwood floors, I charged $40, for the paint on the woodwork $60.

HOW MUCH IS YOUR TIME WORTH?
Another factor coming in to play is your time. If there is damage or painting to be done, you can deduct for your time, at a reasonable hourly rate. I’ve generally figured $35 an hour, but have a feeling that this is on the low end of things. I use this hourly rate to figure out how much to charge for miscellanous things, like personal items left in the storage area (I bill them according to how much time it took me to haul their things out to the trash/curb.)

CLEANING CHARGES
Thus far, I have always had tenants who left their place clean as a whistle. One year, it was so sparkling that I actually gave them a $20 credit on their deposit for doing such a fantastic job. When the day comes that I have to deduct for cleaning charges, I plan to use my hourly rate to figure the charges.

HOW MUCH DO YOU VALUE YOUR RELATIONSHIP?
This is where I become less business-like. I have on occasion ran into past tenants on the street, and would rather that they didn’t hate me for being another money-grubbing landlord who took them for every dime. I don’t take as much money out as I could; but (perhaps foolishly) go for the karma instead.


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4 thoughts on “Refunding the security deposits. Mostly.

  1. why can\’t you charge the amount it would cost to refinish the entire floor? i would think that a tenant should be responsible for the cost of repairing any damage beyond normal wear and tear.

    if a tenant puts a hole in the wall, of course you can\’t charge the cost of putting up a whole new wall. but in that case there are other methods of repairing the damage, such as a plaster patch & repainting. in that case, if the whole room needed to be repainted, they would be liable for that cost, wouldn\’t they?

    it just seems to me that if the only way to repair the floor is to have it refinished, then the tenant should be liable.

  2. The thing is, the scratches on the floor weren’t bad enough to warrant any kind of refinishing. They were the sort of scratches that one would expect to show up in a few years, as normal wear and tear, but were excessive for one year’s use.

    In the case of the hole in the wall, that’s something that would obviously need to be fixed immediately, and I would have no problem billing the tenant for the costs to repaint the entire room.

  3. Landlady is right! Unless you know your operation is airtight, overcharging tenants’ security deposits is the #1 reason tenants seek lawyers. I’ve had a tenant force me to take a landlord to trial over $100 the tenant thought was excessive withholding from his $1200 security deposit for “cleaning.” It cost the landlord thousands of dollars.

  4. I, too, have struggled with the Less Easy Things to Figure Out.
    Wear’n’tear is quite subjective, and is likely to be different for a renter compared to an owner – it’s relative to your (vested) interest in the property.

    I tend to err for the renter as I don’t want the hassle of any court calls. Pictures may be a way to prove your position if you’re ever called to your judgement.

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