What a Landlord Can Deduct From a Security Deposit

The tenants have moved out and the rental property needs to be prepared for someone new.

The costs of restoring that property may be able to come out of the security deposit.

Here's what a landlord can deduct from security deposits in most jurisdictions.

1. Damage Beyond Normal Wear And Tear.

If there is damage to your carpet, for example, you can charge for a direct repair or a prorated replacement of the carpet.

If the carpet is 5 years old and has a depreciation of 10 years, then the security deposit can be charged 50% of the total cost.

Interior and exterior issues apply equally to this stipulation.

2. Cleaning Needs.

This security deposit charge can be a bit tricky. How do you know if a tenant properly cleaned a home?

If they have photographic evidence that they properly cleaned the property or have receipts that prove they did, then your cleaning vendor or personal work completed may be challenged if charged to a security deposit.

3. Removal Of Abandoned Items.

If tenants leave things behind at a rental property and they are considered to be abandoned, then the disposal of these items can be charged against the security deposit. If you're required to store items for the tenant, the storage charges may be able to be charged against the security deposit as well.

4. Unpaid Utilities.

If there are utilities that the tenant was required to pay and they did not, then you may be able to cover that cost with security deposit funds.

5. Unauthorized Improvements.

If your tenant painted a bedroom blue and it was originally white and you didn't give permission for this change, you may be able to charge restoration costs to the security deposit.

If the work is good and you like it, then you can keep the upgrade's value, but you can't claim any costs for it for taxation purposes.

Remember to refund any outstanding security deposit amount in the time allowed.

For some landlords, that is as short as 14 days.

Keep an itemized list of expenses to send along as well to avoid being challenged about what a landlord can deduct from security deposits and what they cannot deduct with your next tenant.

Posted on Jun 23, 2015


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