Most landlords require tenants to put down a security deposit as a safety measure in the lease agreement. However, there are limitations to what a landlord can deduct, and knowing what those are can save you from potential legal trouble.
What the Tenant's Security Deposit Covers
Unpaid Rent
One of the most common deductions from the security deposit is to answer for unpaid rent. Although the reason behind the late dues may be valid, it doesn't change the fact that a tenant who can't pay rent will affect your rental income. As for what fees can a landlord deduct, the following are valid:
- One month's rent
- Outstanding bills
- Late fees
Property Damage
Aside from the normal wear and tear that happens during the tenant's stay, there are other damages a tenant can cause. Repair costs are not limited to the rental unit, but the entire rental property. That means that the listed instances below can be applied to the neighbor tenant's rental unit as well:
- Holes in walls
- Stains on the carpet or the floor
- Broken doors, windows, or appliances
- Damage to other rental features both interior and exterior
For clarity, it would be better to list the potential security deposit deductions in your lease agreement, especially when it comes to coverage for property damage as it can lead to disputes over security deposit limits and what you should let the tenant pay for. Keep in mind that Georgia law states that landlords cannot charge tenants for normal wear and tear.
Cleaning Costs
When a tenant moves out, they don't always practice the courtesy of cleaning the apartment, which leaves them with chores to do for the next renter. In that case, you can hire professional cleaning services and list it as a valid security deposit deduction.
This isn't limited to a tenant vacating the premises. There are instances when they leave the rental unit in such a mess that it can already affect the other tenants renting in the property. An unclean unit can lead to bad smells, attraction of pests, and other inconveniences to nearby residents.
Utility Bills
Many landlords put utilities in the tenants' names. However, there are instances where they charge tenants themselves. This can become an issue when the tenant refuses to pay the bills, as the costs will fall on the landlord. In that case, the outstanding bill can be deducted from the tenant's security deposit.
This can be stressful if you handle more than one rental unit. There are property management companies like PMI Georgia that can handle not only accounting, but payment of vendor bills, security deposit disbursements, recording of expenses, and more.
Pest Control
Pest control can be a complicated area, especially since you have to determine first where the pest came from and how the infestation started. The best way to know is to conduct an inspection first. The rental inspection reports ensure that you charge the right person, including yourself.
If you find that a tenant caused the pest infestation and refuses to address the issue, you may use the security deposit to cover the costs for pest control services or other repairs for damages that the pests may have caused.
Legal Fees
If a dispute leads to legal action, you may charge the legal costs to your tenant's security deposit, but it depends on the circumstances. If the entire security deposit is not enough to cover the tenant's outstanding balance and they refuse to cover the rent, you can sue in small claims court to get what you're owed.
Before and After Security Deposit Deductions
What Landlords Should Do Before
It's smart to conduct an inspection first before you deduct money from the security deposit since you can use the inspection report to justify the charges. A heads-up through a written notice is also required so the tenant will know that an inspection is due, and they will have time to fix the issue as per the rental agreement.
What Landlords Should Do After
Provide receipts including an itemized list of all the security deposit deductions you made. State law requires landlords to provide these documents one to three months after the lease term ends. If you did the work yourself, you must include a description of the work, how long it took, and your hourly rate in the itemized statement.
Returning the Security Deposit
It's a general rule for a landlord to return the security deposit or the remaining amount once their tenants leave. You will have 21 days to return the security deposit to a forwarding address, along with an itemized receipt if there were deductions made. You may also deposit funds to a designated bank account.
Not doing so can provide the former tenant grounds for a lawsuit, and Georgia law states that the landlord will cover legal costs if they wrongly withheld security deposits. The tenant can recover damages up to three times the amount of the security deposit if the landlord acted in bad faith.
Security Deposit FAQs
Can a landlord deduct for normal wear and tear?
No, you can't. It's almost impossible for tenants to leave a rental property in the same condition, no matter how much they maintain it due to the varying life expectancy of certain items.
Considered normal wear and tear are fading of wall paint, minor scuffs, small nail holes, worn carpet, minor floor stains or scratches, worn door handles or hinges, and more.
How much can I charge for security deposits?
Different state laws determine this but for California, the limit is two times the monthly rent for unfurnished units, and three times the monthly rent for furnished units. Make sure to add the amount to the lease agreement before renting to a tenant.
How much should I deduct for repair costs?
You can use up the entire security deposit, so there's no such thing as a significant amount. You can use all of it to pay for rent owed as well when the tenant moves out without addressing outstanding bills.
How can I identify which damages are caused by a tenant?
Regular rental inspection can help you track the damages that were caused to your property. Through the rental inspection report, you can identify what you can charge on security deposits, and it will also serve as documentation in case the tenant asks for proof.
With the Help of Property Managers
Knowing what you can deduct from security deposits such as necessary repairs and unpaid rent is only a small aspect of property management. You also need to conduct regular property management to ensure you won't need to charge for property damages in the first place.
This can all be hard to juggle with several rental properties, but a property management company like PMI Georgia will have enough resources to manage your properties diligently. From rent collection to handling eviction, we can help you get the most out of your investment.
You can use our free ROI calculator to learn whether your property is generating its maximum potential. If not, schedule a consultation with us to discuss how we could maximize your property's revenue.
