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A Property Management Battleground: Security Deposits

Aug 14, 2012 2:02:36 PM

One of the many hot buttons in property management is the disposition of security deposits. As a 3rd party property management company, we occasionally find ourselves directly in the middle of security deposit battles.

Our Tenants, naturally, want all of their deposit back and our Owners, naturally, want to keep the entire deposit.

First, I'll start by saying that we refund a large percentage of our security deposits in full. And the reality is that we WANT to refund the deposit in full.

Our staff spends a great deal of time and effort to prepare properties for rent. Our lives are made much easier if the home needs little to no work for the next Tenant.

In many cases, our Tenants do a great job of leaving their property in rent-ready condition. We don't expect perfection, but we do expect our Tenants to take care of all items outside "normal wear and tear." And there's the rub... the definition of "normal wear and tear" can vary greatly, so it's important to establish standards and expectations so we are on the same page with the Owner and Tenant.

There are some basic, obvious, parameters for disbursing the security deposit:

  1. If the Tenant owes rent, or other fees, the security deposit will be used to pay those charges.
  2. If the property requires significant cleaning, the security deposit will be used to clean the home.
  3. If the property has damages outside normal wear and tear, as a result of the Tenants or their guests, the security deposit will be used to make the repairs.

Items #1 and #2 are generally easy to define. The third item can be trickier, but generally should be easy to sort out if proper inspections are conducted before the move-in and again after the Tenant departs.

I'm always surprised when Tenants claim that a hole in the wall shouldn't be their responsibility to fix and I'm equally surprised when an Owner claims the Tenant should be charged to tighten a loose toilet seat.

Our job, as a professional property management company, is to be as fair as possible to both parties by relying on our experience and understanding generally accepted standards.

Again, it all comes down to laying proper expectations at move-in and again when the Tenant provides notice. However, in spite of our best efforts, we are sometimes criticized for making a bad decision, which is an inevitable part of property management.

Jeremy Tallman

Written by Jeremy Tallman

Jeremy is the President and Managing Broker for T&H Realty Services. He has been active in the Central Indiana real estate market since 2000 and leads one of the most successful single-family property management companies in the state.

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