Security deposits can be a win-win when they’re handled correctly. After all, they protect the property while allowing tenants to get their money back, as long as they treat the property well. That said, it’s essential for both landlords and tenants to understand what constitutes normal wear and tear versus damage. Today, we’ll discuss the importance of a deposit, legal security deposit deductions, and costs you can’t charge.
The Purpose of a Security Deposit
Security deposits are a crucial part of the rental process. Many Austin, Texas, property management companies charge a security deposit, in addition to the first month’s rent, when a tenant first moves into a rental property. This protects against things like unpaid rent, lease violations, and damage beyond normal wear and tear.
If the tenant takes good care of the property, pays their rent, and causes no excessive damage, they can typically receive their deposit back at the end of their lease term. But how does a landlord determine what to deduct? There are certain things that warrant deductions, and some that don’t, which we’ll discuss below.
Legal Security Deposit Deductions
Landlords can’t deduct from a tenant’s security deposit for any reason. They may only deduct for actual, documented losses that are allowed by law and the lease. With that, it’s crucial to provide tenants with an itemized list of charges and supporting evidence, so they understand why they’re being charged.
Some of the most common security deposit deductions include the following.
Unpaid Rent or Fees
Utilities Owed by Tenants
Damage Beyond Normal Wear and Tear
Excessive Cleaning Needs
Missing Keys or Garage Remotes
Unpaid Rent or Fees
Landlords are allowed to deduct from the security deposit for past-due rent or lease-permitted fees (like late fees) when they’re owed. That said, the lease should clearly outline the amounts due for rent, late fees, pet fees, and other applicable charges.
Utilities Owed by Tenants
If the lease makes tenants responsible for utilities and they leave a final balance, the landlord can deduct the amount they had to cover from the security deposit. If this is the case, it’s crucial to send tenants the final bill and proof of payment (made by you, the landlord).
Damage Beyond Normal Wear and Tear
If there’s property damage that exceeds normal wear and tear, landlords can deduct the cost of repairs from the deposit. In this case, property damage may include things like large holes in walls, broken blinds, pet stains, or damaged flooring. Again, it’s crucial to document the damages with before-and-after photos, along with estimates from vendors.
Excessive Cleaning Needs
Routine cleaning that you’d do between any tenants is not deductible. However, heavy, negligent messes can be. For instance, if there’s excessive grease, nicotine residue, or pest issues due to poor housekeeping, you may be able to deduct for these issues. You’ll want to provide photos and a detailed cleaning invoice to avoid disputes.
Missing Keys or Garage Remotes
When keys, fobs, or garage remotes aren’t returned, landlords can deduct the cost of rekeying or replacing the device. In this case, you’ll want to attach the replacement receipt and note any policies regarding rekeying for security reasons.
What Landlords Cannot Legally Deduct
While landlords can deduct certain costs from a tenant’s security deposit, some things cannot be deducted. Here’s what to steer clear of if you’re making security deposit deductions.
Normal Wear and Tear
Routine Turnover Tasks
Pre-Existing Property Issues
Necessary Improvements or Upgrades
Landlord-Caused Damage
Normal Wear and Tear
Ordinary use of a home causes minor deterioration over time, which is not deductible. For instance, small nail holes, light scuffs, traffic wear on carpet, or slightly loose door handles generally do not qualify for deductions. Essentially, if it would naturally occur over a typical lease term without negligence, it is considered wear and tear, not damage.
Routine Turnover Tasks
Normal cleaning, bulb replacements, air filter replacements, or repainting a property are an owner’s responsibility–not deductible from a security deposit. So, unless the condition is excessive or negligent, you shouldn’t charge the deposit for these typical maintenance tasks.
Pre-Existing Property Issues
Tenants aren’t responsible for damage that existed before they moved in, or that stems from old systems or structural issues. For instance, a fridge that fails due to being old, settlement cracks, or an old carpet at the end of its useful life are natural occurrences. If the move-in checklist or photos show that the issue pre-dated the tenancy, you cannot deduct for it.
Necessary Improvements or Upgrades
Rental owners can’t use a tenant’s security deposit to upgrade or improve the property. Replacing the flooring, swapping basic fixtures, or making aesthetic upgrades aren’t deductible from a previous tenant. That said, if tenant damages lead to replacements, landlords can only deduct the remaining useful life, not a brand-new upgrade.
Landlord-Caused Damage
Costs that result from a landlord’s negligence aren’t deductible. For instance, water damage from a leak that went ignored or appliance damage during a landlord’s repair visit is on the owner. After all, a security deposit is meant to cover tenant-caused losses, not landlord-created ones.
Protect Your Rental With Professional Management
Security deposit deductions can be a major point of dispute between landlords and tenants. However, they don’t have to be, especially if you have a professional management team by your side. A reputable property manager helps streamline the entire process–from move-in checklists and mid-lease inspections to on-time deposit returns.
Here at Stone Oak Management, our team of property managers can help you make the most of your rental business. So, contact us today to learn more about our comprehensive management services.
