First, let's look at your lease. It probably has a section that reads like this:
Security Deposit: Tenant shall deposit with Landlord the Total Deposit in Section X of this Agreement as a Security Deposit to secure Tenant's faithful performance of all of his or her obligations under this Agreement, including the payment of rent, and cleaning and repair of the premises upon surrender.
Essentially, a security deposit is a landlord's best guarantee against risks of rent nonpayment and damage to the premises.
Using the Security Deposit as Rent Payment
The landlord can use the security deposit to remedy tenant's failure to pay rent due to giving insufficient notice to terminate the tenancy. A tenant who vacates on insufficient notice is obligated to pay rent for the minimum notice period beginning when the tenant did give notice, or if no notice was given, beginning when tenant vacated.
Using the Security Deposit to Pay for Repairs
The security deposit can be used in repairing damage to the unit caused by the tenant or by the tenant's guests. This does not include ordinary wear and tear on the unit.
Using the Security Deposit to Pay for Cleaning
The landlord can only keep the amount in the security deposit that is needed to return the unit to the same level of cleanliness it was in at the beginning of the tenancy.
- "Last month's rent". It is better not to label a portion of the security deposit as last month's rent because the tenant may be entitled to forego payment of the final month's rent by deducting it from the amount on deposit. This reduces the amount you can use to make repairs to the unit, and could require litigation against the tenant to get reimbursed for the damage!
- Tenant's Right to Inspection. Upon notification by either party of intent to terminate tenancy, the landlord must give the tenant written notice of his or her right to request an initial inspection of the unit and to be present during the inspection. [Note: this is not required in three-day notice terminations] Contact an attorney to obtain a proper Notice of Vacating Tenant's Right to Request Initial Inspection form to give to your tenants.
- Itemized Statement. Based on the initial inspection, the landlord must give the tenant an itemized statement specifying repairs and/or cleaning proposed to be the basis of deductions from the security deposit. Contact an attorney to obtain a form for itemized inspections.
- Twenty-One Calendar Day Deadline. The landlord must provide the tenant with an itemized statement indicating the basis of any deduction, and refund any remaining portion of the security deposit, no later than 21 days after a tenant's vacancy. [Note: Failure to provide tenant with written accounting of the deducted portion of security deposit could mean that the landlord has to refund the entire security deposit to the tenant]
- Request an Inspection Before You Move Out. The initial inspection is required only if the tenant requests it, after having received notice of the right to request an inspection.
- Receipts. Tenants should retain receipts or other documentation showing repairs or cleaning performed by the tenant prior to vacating.
- Demand Security Deposit. Tenants should present the landlord with a formal written demand for a refund of the security deposit to which they are lawfully entitled. Contact an attorney for a Tenant Letter to Landlord Demanding Return of Security Deposit.
Both Landlords and Tenants should:
- PHOTOGRAPH the condition of the unit upon the start of the tenancy AND when the tenant vacates.
- Landlords: Maintain complete WRITTEN records of all repair and cleaning costs upon which any security amount is based.
- Understand that after the initial inspection, but before the tenancy terminates, the tenant must be given an opportunity to repair or clean the identified problems in order to avoid deductions from the security deposit.