Almost every week, I receive at least one call from a landlord or tenant regarding how to handle a security deposit.
For the landlord, there is ONE rule that you must remember: You must refund the entire security deposit within 21 DAYS after the tenancy ends OR give the former tenant a sufficient WRITTEN explanation as to why part or all of the security deposit is not being returned.
This is the 21 DAY RULE.
Here are a few recommended tips for the landlord:
1. Make sure to send the letter to the last known address even if it is the address where the tenant just moved out.
2. Send the letter by certified mail and get a return receipt.
3. If you return any or all of the security deposit, it would be preferred if you sent it back in the form of a money order or cashier’s check rather than a check (identity theft).
4. If you are not going to return all of the security deposit, enclose an accounting statement to demonstrate why you are entitled to retain the security deposit.
5. Don’t forget to add the appropriate interest to the security deposit (currently 1% per year).
6. Talk with a knowledgeable landlord-tenant law attorney if you have questions. A lot of tenants know the rules better than their landlords and you as a landlord can incur civil penalties for mishandling this process.
It’s interesting to find out about how security deposits are dealt with around the world – in the UK, there is a niche business in the assembly of detailed inventories which capture the condition of each surface and item within the rental property just before move-in, to avoid disputes over charges from the deposit after move-out.