Real Estate blog

Keeping a departing tenant’s deposit? Make sure your ducks are in a row…

When it comes to returning a tenant’s deposit when he vacates a property I have tended to go down one of two paths. I either a) return 100% or b) keep most/all of it. I don’t tend to have a lot of cases that fall in-between.

I’m usually leaving some money on the table when I return 100% of a tenant’s deposit, but for me that’s ok. If a tenant leaves the house clean and the landscaping looking nice then I won’t charge him just because he left a few coat hangers in the hall closet.

But unfortunately I’ve had a couple of cases recently where I had to keep 100%. In my experience these tend to fall into one of three categories:

The tenant slinks into the night. This will happen when the tenant knows he’s trashed the place and doesn’t bother to contest the fact that you’re not returning the deposit. Note that if you do owe the tenant the deposit back you’re not relieved of this obligation simply because he doesn’t leave a forwarding address – so make sure your documentation is in order in case he decides to come back for the money. A negotiated deal where you retain the deposit in lieu of legal action. I had a recent case of a tenant who broke their lease and abandoned the property with unpaid rent due. It’s always advisable to have a strongly worded clause cautioning the applicant that the deposit cannot be considered security for unpaid rent. In most states the property code provides the protection to landlords (in Texas it does). Having this language helps you to negotiate from a position of strength. After a series of threatening pay-or-quit letters we signed an amendment via which I agreed to forego legal action in return for retaining the tenant’s pre-paid last month’s rent and the deposit plus a pro-rated charge for the last month that they stayed. The tenant howls. This is the one you need to be prepared for. Take photos. Keep itemized receipts. And within the 30 day window (check your state’s property code) present the ex-tenant with a neat statement detailing your charges. The best defense, in these cases, is simply to act as if you expect to be taken to court. Take this philosophy and you’ll end up clear, transparent, solid statement of charges that will probably take the wind out of your complaining ex-tenant’s sails.

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