There is a lot of stress around the resident’s move-out process, particularly around the security deposit return letter. So, what does it need to say, and when does it need to be sent?
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What Is a Security Return Deposit Letter?
When a resident moves out, the landlord is responsible for providing them with a security return deposit letter. Essentially, the purpose of this letter is for:
- Providing the total amount of the security deposit being returned to the resident
- Itemizing what damages or repairs were needed along with the funds to complete them
In some states, a landlord must provide a resident with a security return deposit letter before using any of the security deposit funds to cover damages or repairs.
Saying the Wrong Thing at the Wrong Time
Do you have any idea what can happen if the letter says the wrong thing and isn’t sent on time?
You can be fined!
That’s right. If the letter is incorrect or money is not returned on time, you can end up paying money. Sometimes it is as much as three times the original deposit, regardless of whether they would have gotten it back.
Said another way, the resident can destroy the house, and if you screw this step up, you can end up owing them money!
Important Information for Your Security Return Deposit Letter
As always, you want to make sure you are up-to-date with the current landlord-tenant laws in your area as they can vary greatly and change often. But, as a rule of thumb, you’ll want to know the following information before sending your security return deposit letter to your resident.
When to Send It
In some states, the letter and security deposit (if any) must be mailed to the resident within 60 days of surrendering the property. This requirement is MUCH more than in other states. Typically state Landlord-Tenant law requires 30 days.
When Not to Send It
You don’t need to include a letter if you send them the whole deposit. What’s the point?
Where to Send It
The security return deposit letter must be mailed to the last known address or the forwarding address (if it was provided).
Typically, when a resident submits notice, they will know where you should forward the move-out accounting and security deposit. If it isn’t on the notice, they will usually provide it to you when they turn in the keys. However, if they don’t (and sometimes they won’t), you will be required to send it to the last known address, typically the property.
The Letter Should be Simple
The letter can be and should be simple. Don’t try to overdo the letter. Simply keep it basic and focus on clearly communicating what happened to the resident’s security deposit.
What to Include in Your Security Return Deposit Letter
Speaking of what happened to the resident’s security deposit, let’s take a closer look at some of the information you need to include in your security return deposit letter.
The Letter Must Include a Complete Accounting of Resident’s Security Deposit
The letter must include a complete accounting of the resident’s security deposit if you aren’t returning a portion of it. Meaning, if you have kept any of the deposit for damages to the property or unpaid rent, then you need to show what you spent (or plan on spending) to cover the damages or rent.
You should typically itemize the charges and then show the security deposit application to those outstanding charges.
What Can a Landlord Take From a Security Deposit?
To keep some or all of a resident’s security deposit, you should have all of the specific situations detailed in your lease agreement. Your lease should still be clear on what can be deducted to avoid disputes or legal proceedings, even though some state laws outline reasons why a landlord might withhold funds from a security deposit.
Here are just a few of reasons that funds can be taken from a security deposit:
Recovering Past Due Rent
If you are dealing with a resident who owes past due rent, you may be able to start recovering some of these funds by using the resident’s security deposit. Unfortunately, the security deposit might not cover all of the past due rent, in which case you may need to take your resident to small claims court.
Damage that Exceeds Normal Wear and Tear
The cost to repair any damages caused by normal wear and tear is not the resident’s responsibility. However, any damage that exceeds normal wear and tear is and the costs to repair these damages can be taken from their security deposit.
What Is Considered Normal Wear and Tear?
Defining normal wear and tear can be tricky, but as a general rule of thumb will include things such as:
- Burnt out lightbulbs
- Hardware or appliances that have broken due to age
- Warping of floorboards or doors due to moisture, temperature, or age
- Grime, dust, and dirt (that is not excessive)
- Dirty curtains or blinds
- Broken plumbing from regular use
- Nail and pinholes in walls (that are not excessive)
- Scuffed walls
- Faded wallpaper or paint due to exposure to sunlight
- Light markings, stains, or wear on the carpet from regular use
Removal of Abandoned Property
Depending on the local laws, you may have the ability to remove any abandoned property from your rental once the resident has moved out. Unfortunately, if they leave large pieces of furniture behind, this may require additional costs.
If you have to hire movers or disposal companies, be sure to keep your receipts and itemize this in your security deposit return letter.
Unpaid Utilities
Similar to past due rent, if a resident leaves with unpaid utilities, you can potentially use some, or all, of their security deposit to cover these funds. Again, you will have to check with local laws and regulations surrounding security deposits before doing so.
A Penalty of Early Termination of Lease
If a resident terminates a lease early, there will likely be a penalty, as outlined in your lease agreement. In certain situations, the security deposit may be able to contribute to some of the funds that are required for the penalty.
Damage to the Property
One of the primary reasons funds are taken from a security deposit is to cover damage to the property.
Can You Charge for Something You Are Not Going to Fix?
Can you charge for something you are not going to fix? If the resident put a scratch on your hardwood floor, you aren’t required to have it repaired, but you can charge for the damage. You need to ensure the repair is reasonable to fix the problem, and it can certainly be charged.
When Should You Return Security Deposit Interest?
The resident’s security deposit may accrue interest, depending on the type of account it is held in. Ultimately, this will be determined by your local laws, some of which require an escrow-type of account.
In some states, landlords must return any interest that accrues from these accounts, while others don’t. Make sure you check out the details surrounding security deposit interest.
Security Deposit Return Letter Template
Including all of the information we have provided in this article, you should be able to draft up a security deposit return letter of your own. If you’re stuck, don’t worry. We’re here to help.
For your help, we’ve included a copy of our move-out letter. You are welcome to use our format and use it as a tool when making your own. Here’s a copy of a letter you might send to a resident:
Tenant Name 123 Main Street Anytown, TN 37000
Re: Security Deposit Statement
Dear {Tenant Name}:
Enclosed, please find an itemized list of charges. Based on these charges, you have a balance due of $347.98.
Credits: Security Deposit $750.00
Total Credits $750.00
Charges: Trash and Debris Removal $500.00 Replace Torn Carpet Strips – Living Room $88.50 Replace Missing Grease Pans on Stove $59.00 Replace Globe on Fixture – Bedroom 3 $15.00 Outstanding Amount $435.48
Total Charges $1,097.98
Amount Due $347.98
Please remit the balance due immediately. If you have any questions or concerns regarding the charges or balance due, please contact us at [email protected].
Regards,
Final Thoughts
The moveout process can be stressful, but it doesn’t have to be. Hopefully, it will be a breeze now that you have a better idea of handling the security deposit return letter.
Good luck with your resident’s move-out process, and good luck sending them the security deposit return letter.
Matthew is the CEO of Evernest. He is a student of the book Good to Great and is passionate about building the best property management company on the planet (and maybe even the universe if Elon Musk will hurry up). You can usually find Matthew at the baseball field with his son, at a dance recital with his daughter, or at his favorite restaurant with his wife, when he’s not in the office. And if you can’t find him in any of those places, it probably means he’s traveling.
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