Preparing a Security Deposit Settlement


Landlords need to require a security deposit prior to a tenant moving in, and it is equally important to known how much you can charge for a security deposit. 

If there are damages to the residential property, or a balance owed under lease, the owner can use the deposit to mitigate those losses. Deposits can total up to hundreds, and even thousands, of dollars. The security deposit settlement can likewise be a major source of friction between property owners and renters. The focus of the arguments are particularly on the amounts subtracted and whether charges are legitimate or refundable.

Landlords may make reductions from a renter’s security deposit, in the event they do it properly and for allowable conditions. The correct method to make deductions requires written itemization of the deductions with supporting proof. What are the types of damages that can legally be subtracted from a security deposit prior to returning the balance to the previous occupant?



Security Deposit Settlement: Unpaid Rental Payments or Other Charges


Frequently, a security deposit settlement includes overdue monies owed as a result of past due rent. Other charges can consist of late charges, utilities or any other service offered the tenant with an outstanding balance owed. It can likewise include not returning the keys, garage door openers, or changing products from the owner’s rental property that were stolen/removed (home appliances, ceiling fans, thermostats, etc).


Security Deposit Settlement:  Repair Work and Damages 


In order to adequately prepare a security deposit settlement for damages, you must fairly identify what damage triggered by the occupant or their guests, and what need to be considered regular wear and tear. A renter is not responsible for typical wear and tear.

What exactly includes normal wear and tear will depend the affected item, as well as the useful life of the item which is damaged.  Deciding what is normal is often the hard part. To make matters worse, many states, do not provide an exact objective definition of normal wear and tear.  North Carolina is an example of a state does not have a predefined definition of normal wear and tear for security deposits, which makes your job of ascertaining damages more difficult.
Luckily, we have made this determination easy for you in our guide on how to handle security deposits in North Carolina.



Generally speaking, if there are minor cleaning issues, then you will not be able to retain money from the security deposit to offset the cleaning.  What you do not have to deal with is a filthy house. The standard is to return the home back to the same level of tidiness as when the occupant first moved into the property. A charge can’t be put on the security deposit for a regular cleaning to make the home rent-ready for the next occupant.


Showing A Security Deposit Settlement Claim


A typical problem for a landlord is showing that the condition at the time of the occupant’s departure is substantially different from that at the time he or she relocated. It’s a good concept to have actually recorded the move-in condition thoroughly. The main ways to do this are with images and a move-in form or checklist a new tenant finishes and signs. This form needs to make note of any products the brand-new renter finds during the very first week of occupancy.

After the renter has left, it is very important to then totally document the condition of the house with extra images and a list of damages, or modifications to the condition. Many landlords want to do the work themselves and then charge the former tenant. This service needs to be discouraged as it is highly not likely a judge will accept charges that are not managed by a third-party contractor. Every reduction  from a security deposit needs to be accompanied by an invoice or an estimate, and these documents must be provided to the former renter.  In other words, it is important for the landlord to understand what they can use a security deposit for.

If the previous tenant doesn’t get an itemized list and accounting, the owner could lose their right to keep any part of the security deposit. Even if there is comprehensive damage that will cost more than the security deposit to fix, the landlord needs to send a letter to the previous renter describing the damage and the property owner’s intent to keep the security deposit to pay for this damage.


Security Deposits Belong To The Occupant Until Proven Otherwise


In general, a security deposit is fully refundable. By law in most states, the landlord must reimburse the deposit promptly after the renter abandons unless there will be charges versus the deposit. The majority of states give landlords a set quantity of time (normally from 14 to 30 days) to either return the entire deposit or provide a list and statement of reductions, with supporting invoices, from the down security deposit settlement. If there will be any part refunded it ought to be consistent with this declaration. If a landlord wants to subtract from a security deposit, the renters need to know the conditions under which reductions will be made as supported by language in the lease.

The balance of a security deposit (together with the settlement statement) must be sent out to the renter’s next address. Remember to ask the occupant to supply a forwarding address prior to the time they vacate. It’s also a great idea to send out the settlement letter, with any returned funds, certified  mail. If the renter later on claims that he or she did not receive either, you will have clear proof that you sent these items by mail.

As a landlord prepares a security deposit settlement statement, and makes decisions relating to the return or keeping of funds, there must be one concern on their mind. Can I support this choice to keep these funds to a judge? If so, there are no concerns, and expeditiously providing the tenant with a properly prepared security deposit settlement, is the most important responsibility.


Get in Touch with Us About Security Deposit Settlements


Let us know what you think.  You can get in contact with us at the links below.  

Also, don’t forget to read our comprehensive guide on how to handle security deposits, to set yourself up the right way.  

Read:  How to Handle Security Deposits in North Carolina

 The Team at Linchpin Property Management


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