When a Landlord Can Keep the Security Deposit
Normal wear and tear doesn’t count
When a tenant moves into a rental property, he or she will pay the landlord a security deposit in addition to first month’s rent. This deposit will typically be returned to the tenant at the end of the lease term, as long as the tenant follows all the terms of the lease agreement. Learn common reasons a tenant may not be entitled to the return of their security deposit, in whole or in part.
- Landlords can keep the security deposit if the tenant breaks the lease or doesn’t pay rent.
- Landlords can also keep the security deposit when there is property damage (beyond normal wear and tear).
- Cleaning costs and unpaid utilities can be subtracted from a tenant’s security deposit before it is returned.
Security Deposit Law Varies by State
Each state has specific security deposit laws landlords and tenants must follow, including the reasons you can keep a tenant’s security deposit. However, many states share some common reasons a tenant should not expect their security deposit to be returned. These reasons include breaking leases (such as by moving out early or not paying rent), extensive property damage, and cleaning costs.
Breaking or Terminating a Lease Early
If a tenant breaks their lease, the landlord can keep all or part of the security deposit necessary to cover the costs associated with this breach. Again it will depend on the wording of your lease and the particular landlord-tenant laws in your state. If you have included an early termination clause in the lease the tenant signed, they will have to abide by these terms.
An early termination clause could read something like this, for example:
“If the tenant terminates the lease prior to the one year lease agreement or does not give 30 days’ notice prior to move out once the lease has gone month-to-month, the tenant is responsible for rent owed for the remainder of the lease. The landlord will deduct the amount owed from the tenant’s security deposit. If the security deposit does not include sufficient funds to cover the amount owed, the tenant is responsible for paying the additional money owed to the landlord for the remainder of the lease.”
You may also be able to charge the tenant the court costs or attorney fees necessary if you have taken legal action against them.
Nonpayment of Rent
Most states will allow you to keep all or a portion of the security deposit when the tenant does not pay their rent.1
Nonpayment of rent is considered a breach of lease.
When a tenant does not fulfill their contractual obligation to pay their monthly rent, you are usually allowed to keep the portion of this security deposit necessary to cover the lost rent.
Damage to the Property
Another reason you may be able to keep a tenant’s security deposit is because they have caused damage to your property. Damage is different than normal wear and tear on the property.2 Here are some examples of each:
Normal Wear and Tear
- A few small nail holes in the walls from hanging pictures
- A few small stains on the carpet
- A small amount of mildew forming in grout lines in the shower tiles
- Dirty grout
- Tarnish on bathroom fixtures
- Loose handles or doors on kitchen or bathroom cabinets
- Reasonable amounts of dirt, dust, or grime on the floors, walls, or appliances
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- Multiple/large holes in the walls
- Huge stains or holes in the carpet
- Extensive water damage to hardwood floors
- Missing outlet covers
- Missing or damaged smoke or carbon monoxide detectors
- Cracked kitchen or bathroom countertop
- Broken bathroom vanity
- Broken windows
- Broken doors
- Keys not returned at end of tenancy
Under normal circumstances, you cannot make deductions from a tenant’s security deposit to cover normal cleaning costs.3
If the cleaning necessary is excessive, and not the result of normal wear and tear, you may be able to keep a portion of the tenant’s deposit.
For example, if a tenant leaves one bag of garbage in the apartment, it is unreasonable to try and charge the tenant a portion of their security deposit to cover your labor. However, if the tenant has left trash all over the apartment, food in the refrigerator, and numerous personal belongings throughout the property, then yes, you may be able to keep a portion of the security deposit to cover your expenses, as the tenant has not left the property broom-swept clean.
Another example would be if a tenant had an animal that used the carpet as a toilet. You would be able to charge the tenant for the cost of cleaning or, if necessary, of replacing the carpet.
A tenant may not be entitled to the return of their deposit if they have not paid their utility bills. You may be able to keep a tenant’s security deposit to cover any utilities they have neglected to pay and were required to pay as part of their lease.3
The Bottom Line
Remember, state laws will dictate when exactly a landlord can withhold security deposits from their tenants. If you aren’t sure whether or not you would be within your rights to keep the deposit, check with local authorities. A good real estate attorney should know the particulars for your area.
Frequently Asked Questions (FAQs)
Do landlords have to pay interest on security deposits?
Local laws will dictate whether or not security deposits accrue interest. For example, while the state of California does not require landlords to pay interest, the city of West Hollywood does.4 In the city of Los Angeles, interest is only owed to tenants if the building falls under the jurisdiction of rent stabilization policies.5
Are nail holes normal wear and tear?
A few small nail holes may qualify as normal wear and tear. Creating too many nail holes may cross the line into property damage, as could using too large of nails. Like other security deposit issues, it’s best to check with local authorities to ensure you follow the law in your area.
Source: The Balance