One of the biggest points of conflict between Landlords and tenants is when a disputes occur over deposit returns.
Though GWM advises to that the appropriate steps are taken to avoid such disputes, including; taking lots of pre and post photos, conducting thorough move-in and move-out walk inspections, and making timely repairs throughout the Tenancy, disagreements do happen.
In this post we will start with the deposit return process and assume that you have already followed the above protocol:
Step 1 – The Deposit Return
The first and most important part is to create a return that covers the following
- Deposit amount – List the Tenants’ original deposit, as well as remainder at the time of move out (some landlords deduct money during Tenancy – which is another post all together) in a conspicuous position.
- Itemize deductions, if any – You are not required to list the price of every single nut and bolt, but you should break down the cost by job; paint, house cleaning, carpet cleaning, landscape trim. If necessary, you can include a small amount of items in a catch all “general maintenance” but you will want to make sure you can document specifically what falls in that category for disputes (light bulbs, air filters, blind slats).
- List the name of the contractor (and when possible the invoice number) for each repair. Show the Tenant that you didn’t just invent these charges.
- If you have the receipts, don’t be afraid to include them, especially if you did more work than you charged them. Sometimes invoices haven’t been paid by the time the return needs to go out and that is ok, but if you have finalized invoices include them.
- List outstanding rent or violations – Be aware that not all past fees (like late fees from 6 months ago) are allowed to be carried forward. Also, note that you cannot charge for “future rent” not yet received (we see this a lot with a Tenant who breaks a lease).
Make sure you correctly “return” the security deposit funds and disposition
- Every state has a timeline, be sure to know it and follow it. If you don’t, it’s almost always an “automatic” loss for you.
- Determine, in writing, with the Tenant if they will be picking up the return or if you will be mailing it to them.
- Get a forwarding address from the Tenant before they move out.
- Keep attempting to get that forwarding address all the way until the day the return has to go out.
- Mailing the deposit return – You should absolutely send the return “Certified” so that you have a tracking number. This will save you a whole lot of grief if the Tenant claims “you never sent it; didn’t send it on time, or they never received it” – the tracking number with certified is your best friend, and only costs a few dollars.
- If the Tenant never provides a forwarding address, you should still send out a deposit return, ESPECIALLY if they owe you money. Send it to the last known address on file, send it Certified Return Receipt, and that way you will have a record if they do not claim the letter.
- If you owe the Tenant money, then I recommend sending the return, without funds, to the last known address. Keep reminding them that you are holding the funds for pick up.
Step 2 – Responding to a Dispute
Disputes come in all forms, and as a Landlord you have to responds appropriately to each dispute.
- Phone or email disputes – If the tone is appropriate, you may choose to open a dialogue, but often it’s best to ask for disputes to be made formal and mailed…some people may think that is not necessary, but let’s examine why:
- Let’s face it, most people can’t control their temper and emails and phone calls get informal and inappropriate. I can’t count the times a former Tenant will use phrases like “you’re a thief; I am calling the state attorney, the house was a piece of shit when I moved in” and the list of unproductive comments goes on.
- Email, especially, opens up to quick and less formal responses. As a Landlord you want the process to be as deliberate as possible. You want to review their points for validity, and be able to make an appropriate response and sometimes a counter offer to their demands.
- The certified letter – When you receive this, either directly from the Tenant or their lawyer, then you know they mean business. This is the first step required in filing in small claims court, and usually represents the fact that the Tenant (or counsel) knows what they are doing and are taking a practical approach.
- Again, review the letter for valid arguments, point by point looking to ensure that common sense is applied. Often times a letter from an attorney will be verbose and quote a lot of “statutes.” However, simply listing a statute doesn’t tell the whole story as it relates to the deduction.
- Attorney’s constantly like to claim that the deductions are “inappropriate” due to the damages not being above normal wear and tear and then site the statue that a landlord cannot charge for normal wear and tear. However, they never get into the details of what specific damages constitute normal wear and tear or why the damages done by their client are not normal wear and tear.
- Focus on their demand – Is the Tenant offering an alternative solution? Do they give you a reasonable time frame to respond?
Based on their specific arguments, tone and type of resolution requested by the Tenant, these will be the items you factor into your response.
Step 3 – Responding Appropriately
Now it’s time to formulate a response to the Tenant. Any demand for “immediate action” should be met with a letter stating that you need at least 14 business days to review the dispute, the evidence and provided an appropriate response.
- Don’t worry about going into detail with your response on each point. Provide a general, but sound, position as to why you disagree with RELEVANT arguments made by the Tenant.
- Include copies of receipts if you haven’t done so already.
- Request that the tenant send over any relevant evidence to support their claims
- Rarely do Tenants EVER include documentation when they submit a dispute. Pictures, evidence of receipts, etc… are almost never included with their demands.
- Put the onus on them to prove why you should even entertain their assertions.
- If necessary feel free to include copies of the Lease, Move-in Walk thru, Move-out Walk thru, and all invoices or violation notices. However, I would recommend not including pictures. You will get that opportunity when getting ready for court if you go that far. This is the trump card that you want to play close to the vest.
- Offer a settlement – unless you know you have an absolutely open and shut case and you have followed the letter of the law, you should always offer a “nuisance settlement” – basically a small amount of money to save all parties time and money. A lot of times just a few hundred dollars will be enough for both parties part ways.
The Tenant may file respond to your letter, in which you can continue to negotiate. The Tenant may not respond and simply go away (they will definitely not continue to spend money on a lawyer in most cases as they learn quickly that is just wasted money). And of course, the Tenant may file against you in small claims court.
As long as you as the Landlord understand that you have followed the deposit return standards, have all your receipts and documentation, you have everything you will need in court. In addition, usually both parties can continue to negotiate until the day in court arrives.
This is a very basic guideline to handling deposit disputes. Though not overly complicated, there are many gray areas and a plethora of circumstances that may force you to address a deposit issue differently.
This is one of the most important aspects of owning a rental that an experienced property manager can handle for you. Imagine if you are out of stated and trying to handle this on your own? Is the time and energy really worth it? Not to mention unless you are an attorney, how often do you deal with this type of dispute?
Learn more about how to properly protect yourself and your investment property by contacting Goldenwest Management, Inc. Click on the link to visit our website or by calling (866) 545-5303 or visit each office:
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