Handling a tenant’s security deposit is an important element in landlord tenant relationships. It is also the most disputed issue. Landlords often find themselves in a bit of a grey area because there is nothing simple or direct in the rules, regulations and laws that mandate what you can and cannot charge in the security deposit. At Real Estate Connections, we advise the landlords in San Jose we work with to begin managing the security deposit issue before a tenant even moves in.
First, do an inspection of the property with a detailed checklist before your tenant is in the property. Take pictures of the entire house, both inside and out. This will document the condition of your home before your renter begins living there. Give the tenant the opportunity to do an inspection as well. When your tenant completes a walk-thru, compare what you found. Add any of your tenant’s notes to your checklist, and make sure you both sign off on how you agree the condition of the property is found.
At move out time, do a similar inspection. Conduct a thorough walk-thru of the property, and use the same checklist you used at move in. Again, take pictures of everything so you can document and compare how the property looks at move out.
If there is damage, you will need to decide how to charge the tenant’s security deposit. This is where many landlords find themselves in a tricky situation. It is easy to charge for cleaning and carpets. However, you will need to pro-rate some items, such as the condition of paint and any other damage to the house. For example, how do you charge tenants if the carpet is only a year old but you need to replace it?
At Real Estate Connections, we have been doing this for years, so we have developed a process where we follow the courts and their precedents. For example, we pro-rate carpet over seven years. So, if a tenant has been there for one year and we need to replace the carpet, we charge that tenant 6/7 of what the cost is. If a tenant has been there for six years before we need to replace the carpet, we charge 1/7.
The most important thing to remember when you are returning a security deposit is to be fair and swift. This is not an opportunity to make money. You should not charge your tenant to remodel your home. However, as the owner you also should not be responsible for any damage or mess left behind by your tenant. Find a middle ground that is fair to both parties. Make sure you let your tenant know what you will be charging against the security deposit before you return it. Communicating with your tenant honestly will help you avoid a future dispute.
Remember not to delay in your security deposit return. You  have 21 days from the move out to refund some or all of the deposit.
 Be swift. Do not wait until Day 20 or Day 21. It has been our experience that courts are more likely to rule against landlords who wait until the last day to return a security deposit. We recommend that you do it within two weeks. Also, make sure you don’t
charge the tenant for any repairs or cleaning that you don’t end up doing. It’s illegal and will get you in trouble.
Contact us at Real Estate Connections to discuss any questions you might have about security deposits.
