A tenant’s security deposit that they paid to their landlord at move in is something that is due back to the tenants at the end of tenancy assuming there are no damages to the property. One if the biggest mistakes landlords make is that they spend their tenant’s security deposit and then do not have the money for the security deposit to return to the tenant at the end of the lease. Below we will describe how to avoid this situation and avoid being sued by your tenants.
Many states require that a landlord keep a tenant’s security deposit in escrow or an interest bearing bank account while the tenant is occupying the premises. This is because the security deposit is the property of the tenant until the property has been inspected at the end of tenancy. Because the tenant’s security deposit is their money, the landlord may not use the deposit unless the tenant has failed to pay rent or the tenant has damaged the premises.
Under federal law, tenants have a right to have their security deposit returned to them within 30 days of vacating the premises. The landlord may withhold a portion, or the entirety, of the security deposit if the tenant has failed to pay rent or if they have damaged the premises. Within 30 days the landlord must either provide the tenant with the returned security deposit or with an accounting of the damages. Failed return of the tenant’s security deposit can result in legal liability on the part of the landlord. If you are landlord who is afraid you might spend your tenant’s security deposit, then hiring the services of a property management company is strongly encouraged. If they are managing your rental property for you, they will hold your tenant’s security deposit in a trust account for you and the money will be available to refund to the tenants when the time comes.