I just finished sending security deposit returns back to several tenants who moved out of their units on June 1. We had a surge of turnover in some of our college rentals as students graduated and went home for the summer. Most of the tenants got their entire deposit back, but the guys in one 3 bedroom unit lost it all.
We are very clear in our leases about what amounts and what conditions will result in security deposit deductions. The law gives some guidelines on this, but to avoid questions and controversy, I like to spell out more detail in the lease. For example, an addendum to the lease contains many miscellaneous house rules, and fees are included in this addendum. One such fee is a minimum $50 charge for the removal of any personal item after move out. If even a clothes hanger is left behind, we charge $50. We charge more if there is more junk to remove.
Cleaning appliances, carpets, or units in general results in an hourly labor charge against the deposit. Any repairs that are above normal wear and tear include costs and labor, even when the property manager does the work. His time is valuable and it’s not free. I pay the charges that have been deducted from the deposit directly through to him. His “hourly rate” is specified in the lease so there are no surprises. He keeps track of his time and it’s itemized in a letter back to the tenant.
We use a move-in move-out detailed checklist to help determine how much cleaning and what repairs are charged to the tenant. The tenant documents the status of the unit within 7 days of moving in. Part of the checklist details the cleanliness of the unit. This way, when they move out, we are all in agreement about how clean the apartment was when they moved in, any state of disrepair they had to inherit, and any imperfections whatsoever that they don’t want to be charged for. When the tenant moves out, we pull out the original checklist and use it to walk the apartment before any cleaning or work is done. The tenant is encouraged to revisit their own checklist while they are moving out so they can bring the unit back to its original condition.
Most of our tenants are very cooperative and leave their unit in excellent condition. This is the very first time in this building that I’ve had to withhold an entire deposit. Charges add up fast! It doesn’t take much labor to eat up a chunk of cash, and in this case there were personal items that needed to be removed as well as some minor repairs to screens and drywall.
Some landlords are afraid to deduct charges out of the deposit. Some deduct on a whim without documentation and the tenant challenges it. With knowledge of the law, the move-in move-out checklist, and an itemized letter breaking down the charges that goes back to the tenant, you can eliminate stress and worry, and maximize your cash flow in this area. Very little cash needs to come out of pocket at turnover time if you’re organized. Consider a review of your lease and your procedures to see if there is any room to improve this aspect of your rental property business.