Using and Returning the Security Deposit
Over the duration of the tenancy, you’ll hold the tenant’s security deposit, and, when the tenant moves out, you’ll have to use or return it.
Using a Security Deposit
To use a security deposit, you will need to have an appropriate reason or it could be contested. For instance, if there are unpaid utility bills, outstanding rent, or damages, you have the right to use all or a portion of those funds to pay those debts or repairs.
You should also list the amounts for unpaid utility bills, rent, and/or repair costs. Keep this list with your records and provide a copy to the tenant.
Listing how you use a deposit provides proof of how each dollar was allocated in the event of a dispute. You can also use it to track repair expenses and perhaps even find or negotiate cheaper repair services in the future (because you’ve already documented the approximate service price and are able to compare).
Returning a Security Deposit
After any debts and repairs costs are paid, the security deposit is returned to the tenant. Each state has different laws on when the unused deposit needs to be repaid, ranging from immediately to 60 days, so make sure you are in accordance with your state laws.
Landlords are legally required to return unused deposits. Remember that you cannot use the security deposit to restore anything caused by normal wear and tear.
It was your right to hold onto this deposit but not to keep it, and not adhering to this rule could allow a tenant to file a claim against you.