A Complete List of Security Deposit Deductions

Key Takeaways

• Security deposits act as a financial safety net for both landlords and tenants, ensuring compliance with lease agreements and covering potential damages.
• Landlords can deduct from a security deposit for tenant-caused damages that exceed normal wear and tear, such as broken windows and ruined carpets.
• Providing an itemized list of deductions helps prevent security deposit disputes and maintains a positive landlord-tenant relationship.
• Familiarize yourself with local landlord-tenant laws and clearly outline security deposit terms in lease agreements to ensure compliance and transparency.

Security deposits are a common part of the rental process and are designed to be a financial safety net for both tenants and landlords. In this article, we’ll discuss exactly what they are, how to manage them, the laws that govern them, and finally, a common security deposit deductions list.

What is a Security Deposit?

In the world of rental properties, security deposits refer to the lump sums of cash paid to property managers before a tenancy. They exist outside of utility bills, fees, and recurring rent, and are generally only paid once. Plus, they are typically refundable to the tenant once the tenancy is up—under a few conditions, which we’ll dive into later on.

Security deposits act as leverage in rental agreements: so long as tenants take good care of the property and abide by all terms of the lease, they can expect to receive their full security deposit back. It’s good for landlords too, because if a tenant damages a unit or leaves it in a less-than-ideal state, landlords can put that money towards restoring the unit back to its original state.

When Can a Landlord Deduct from a Security Deposit?

Of course, landlords can’t just deduct from a security deposit for whatever reason they’d like. It’s important to remember that security deposit laws vary by state. There are no overarching federal laws to govern security deposit procedure, so make sure to research the laws in the state your business operates.

With that in mind, we’ll dive into three of the most common examples of security deposit deductions below.

Excessive Wear and Tear

The most common reason for deductions occurs when the unit is damaged beyond normal wear and tear. Normal wear and tear includes any property damage that can reasonably be caused through the continuous use of a property, such as minor scuffs, faded paint, small nail holes, and rusted shower rods.

However, excessive wear and tear is when the tenant-caused damage is unjustifiable. Think of broken windows, missing fixtures, ruined carpets, missing fixtures, and seriously damaged walls. After a tenancy, landlords can deduct funds from the security deposit for any repairs—note, however, that this money should only be used for damage repairs and restoration, not improvements.

Landlords can either hire professionals for the job and deduct the fee from the tenant’s deposit or fix the issue themselves. For the latter option, landlords must reasonably charge for their labor based on the market average.

Cleaning Costs

If tenants leave no permanent damage but they lease excessive filth, then landlords are permitted to deduct cleaning costs. The terms of the lease should outline exactly what is expected of tenants when they leave, and in what condition they are expected to leave the property. Most leases follow the broom clean condition, which states that all units should be swept, dusted, and reasonably cleaned. This should not require a professional cleaning service, and it ensures that tenants are taking care to restore the property to a reasonable condition.

When determining what’s eligible for cleaning deductions, think of heavily stained carpets, grimy countertops, dirty ovens, and the like. As with damage repairs, landlords generally have the option to either hire a cleaning service and pass the fees on, or do the cleaning themselves—but their charges must be reasonable; otherwise, tenants can dispute them.

Unpaid Rent

If at the end of a lease term the tenant has an outstanding balance, landlords may deduct the unpaid amount from their security deposit. This may also include other unpaid items, such as late fees and utility bills, that the tenant still owes to the landlord.

In the event of an outstanding balance, landlords must still provide an itemized list for the sake of both parties. Break the deductions down into rent owed, late fees accrued, unpaid utilities, and so on. Failure to properly itemize the charges will leave you on shaky legal ground, so it’s best practice to carefully itemize exactly what tenants owe.

Common Security Deposit Deductions List

When deducting from a security deposit, landlords must provide tenants with an itemized list. These lists are to prevent security deposit disputes and often include written descriptions of the damages.

Below, we’ve gathered some of the most common security deposit deductions, as well as the average cost required to remedy each.

The ranges provided in this chart are drawn from Home Advisor’s True Cost Guide, which uses a collection of data reported by their users. Keep in mind that the average labor costs associated with each deduction will vary greatly depending on your area, so take each price with a grain of salt.

If you’re doing the repairs yourself, charge the average rates for labor of that kind in your area. Drastically overcharging tenants will foster a hostile landlord-tenant relationship, and they’ll be more likely to challenge the deductions.

How Long do Landlords Have to Return Deposits?

The laws surrounding the return of security deposits vary greatly depending on what state a rental property is located in. PA security deposit return laws, for example, require that deposits are returned to the tenant within 30 days of providing a new forwarding address to their landlords. In most states, landlords have around 2–4 weeks to return the funds.

Returning a security deposit is typically done by mailing a physical check. Check your local laws for further details, as some jurisdictions may have more specific requirements, such as mailing the check via certified mail or something similar. Plus, some areas may or may not allow for electronic returns, so stay informed when it comes to your local laws.

How Should Landlords Store Security Deposits?

As with most other aspects of security deposits, the storage of security deposits varies. Many states require landlords to store them in separate interest-bearing accounts. They are not allowed to mingle the deposit with their other business funds to ensure that the money is still there by the end of the tenancy. Additionally, landlords may be required to pay the tenant any interest accrued on the deposit.

However, in other states, laws governing security deposits are scarce. Meaning landlords are free to store the deposit as they see fit, so long as they have the funds available to return it when the time comes.

Conclusion

Security deposits are a routine part of the rental process, so understanding their inner workings and the laws that govern them is important. For more information on security deposit procedures, be sure to visit your state’s official website.

FAQs

What are common security deposit deductions?

Common security deposit deductions include unpaid rent, large holes in the walls, missing property fixtures, broken windows, ruined carpets, and unapproved paint or wallpaper.

What are the PA security deposit return laws?

Pennsylvania security deposit return laws require that deposits are returned to tenants within 30 days of them providing a new forwarding address.

Can a landlord deduct from a security deposit for excessive wear and tear?

Yes, landlords can deduct for damages beyond normal wear and tear, which includes tenant-caused damage like broken windows and ruined carpets.

Can cleaning costs be deducted from the security deposit?

Yes, if tenants leave excessive filth, landlords are permitted to deduct cleaning costs as long as they are reasonable.

Can a landlord ask for first and last month rent plus security in PA?

In Pennsylvania, landlords can request the first and last month's rent plus a security deposit, but the total amount cannot exceed two months' rent during the first year. After the first year, the security deposit is limited to one month's rent.