A security deposit is a refundable deposit that a tenant pays to their landlord before they move into a property (See Also: The Basics of the Security Deposit). As long as a tenant abides by the terms of their lease, this deposit should be returned to a tenant when their lease has expired. There are certain situations where a landlord is allowed to keep all or part of a tenant’s security deposit.
When Can You Keep a Tenant’s Security Deposit?
Every state will have different laws regarding when you are legally allowed to keep a tenant’s security deposit. You must check the laws of the state, county and city where your rental property is located to verify the laws that apply to your situation. However, here are some common reasons you may be able to keep a security deposit:1. Early Termination of Lease
If a tenant breaks their lease, the landlord can keep all or part of the security deposit necessary to cover the costs associated with this breach. Again it will depend on the wording of your lease and the particular landlord tenant laws in your state. If you have included an early termination clause in the lease the tenant signed, they will have to abide by these terms.
An early termination clause could read something like this, for example:
“If the tenant terminates the lease prior to the one year lease agreement or does not give 30 days notice prior to move out once the lease has gone month-to-month, the tenant is responsible for rent owed for the remainder of the lease. The landlord will deduct the amount owed from the tenant’s security deposit. If the security deposit does not include sufficient funds to cover the amount owed, the tenant is responsible for paying the additional money owed the landlord for the remainder of the lease.You may also be able to charge the tenant the court costs or attorney fees necessary if you have taken legal action against them. 2. Nonpayment of RentorThe landlord will attempt to find a suitable replacement tenant. Since this vacancy has been caused by a breach of lease, the landlord is entitled to deduct the necessary costs incurred by this breach of lease from the tenant’s security deposit including the vacancy costs, as well as advertising and marketing costs necessary until a suitable replacement tenant is found to occupy the rental. If the security deposit does not include sufficient funds to cover the amount owed, the tenant is responsible for paying the additional money owed the landlord to cover these expenses for the remainder of the lease.” *
Most states will allow you to keep all or a portion of the security deposit when the tenant does not pay their rent. Nonpayment of rent is considered a breach of lease. When a tenant does not fulfill their contractual obligation to pay their monthly rent, you are usually allowed to keep the portion of this security deposit necessary to cover the lost rent. This is the amount necessary to make you whole.3. Damage to the Property
Another reason you may be able to keep a tenant’s security deposit is because they have caused damage to your property. Damage is different than normal wear and tear on the property. Here are some examples of each:Normal Wear and Tear:
- A few small nail holes in the walls from hanging pictures.
- A few small stains on the carpet.
- A small amount of mildew forming in grout lines in the shower tiles.
- Dirty grout.
- Tarnish on bathroom fixtures.
- Loose handles or doors on kitchen or bathroom cabinets.
- Multiple/large holes in the walls.
- Huge stains or holes in carpet.
- Extensive water damage to hardwood floors.
- Missing outlet covers.
- Missing or damaged smoke or carbon monoxide detectors.
- Cracked kitchen or bathroom countertop.
- Broken bathroom vanity.
- Broken windows.
- Broken doors.
- Keys not returned at end of tenancy.
Normally, you cannot keep the security deposit to clean the property due to normal wear and tear. As a landlord, you are expected to clean the unit before the next tenant moves in. However, you may be able to keep the security deposit if the cleaning necessary is excessive.
For example, if a tenant leaves one bag of garbage in the apartment, it is unreasonable to try and charge the tenant a portion of their security deposit to cover your labor. However, if the tenant has left trash all over the apartment, food in the refrigerator, and numerous personal belongings throughout the property, then yes, you may be able to keep a portion of the security deposit to cover your expenses, as the tenant has not left the property broom swept clean.
Another example would be if a tenant had an animal that used the carpet as a toilet. You would be able to charge the tenant for the cost of cleaning or, if necessary, of replacing the carpet.5. Money Owed to You for Utilities
You may be able to keep a tenant’s security deposit to cover any utilities they have neglected to pay and were required to pay as part of their lease.*These are examples. Consult legal counsel to determine the appropriate wording for your lease and to protect yourself according to your state's laws.
Next: How to Protect Your Right to the Security Deposit