Key Decisions When Preparing A Security Deposit Settlement


Landlords should require a security deposit before allowing a tenant to move in. If there are damages to the property or a balance owed for rent, the landlord can use the deposit to cover those losses. Deposits can amount to several hundreds, or even thousands, of dollars.  The security deposit settlement can also be a major source of friction between landlords and tenants.  The focus of the disagreements are specifically on the amounts deducted and whether charges are legitimate or refundable.

Landlords may make deductions from a tenant’s security deposit, provided they do it correctly and for an allowable reason. The correct way to make deductions requires written itemization of the deductions with supporting evidence.  What are the types of items that can lawfully be deducted from a security deposit settlement prior to returning the balance to the former tenant?

Unpaid Rent or Other Charges

Most commonly, a security deposit settlement includes unpaid rent.  Other charges can include late fees, utilities or any other service provided the tenant with an outstanding balance owed.  It can also include not returning the keys or garage door openers, or replacing items from the rental that were stolen/removed (appliances, ceiling fans, thermostats, etc.).

Repair of Damages

Properly preparing a security deposit settlement involves fairly determining what is a damage caused by the tenant or their guests, and what should be considered normal wear and tear.  A tenant is not responsible for normal wear and tear.  Defining normal wear and tear includes many items in a home because fixtures and other features have a limited life.  Deciding what is “normal” is often the difficult part.


Many items that need to be cleaned are items that also fall under the “normal wear and tear” category.  The standard is to return the home back to the same level of cleanliness as when the tenant moved in.  A charge can’t be placed on the security deposit for a routine cleaning to make the home rent-ready for the next tenant.

Proving A Security Deposit Settlement Claim

A common problem for a landlord  is proving that the condition at the time of the tenant’s departure is significantly different from that at the time he or she moved in. It’s a good idea to have documented the move-in condition thoroughly.  The primary ways to do this are with pictures and a move-in form or checklist a new tenant completes and signs.  This form should make note of any items the new tenant finds during the first week of occupancy.

After the tenant has moved out, it is important to then completely document the condition of the home with additional images and a checklist of damages. or changes to condition.  Many landlords want to do the work themselves and then charge the former tenant.  This solution should be discouraged as it is highly unlikely a Judge will accept charges that are not handled by a third-party contractor.  Every deduction from a security deposit settlement must be accompanied by a receipt or an estimate, and these documents must be provided to the former tenant.

If the former tenant doesn’t receive an itemized list, the landlord could lose its right to keep any part of the security deposit. Even if there is extensive damage that will cost more than the security deposit to repair, the landlord must send a letter to the former tenant explaining the damage and the landlord’s intent to keep the security deposit to pay for this damage.

Security Deposits Belong To The Tenant Until Proven Otherwise

In general, a security deposit is fully refundable. By law in most states, your landlord must refund the deposit promptly after the tenant vacates unless there will be valid charges against the deposit.   Most states give landlords a set amount of time (usually from 14 
to 30 days) to either return the entire deposit or provide an itemized written statement of deductions, with supporting receipts, from the security deposit settlement .  If there will be any portion refunded it should be included with this statement.  If a landlord wants to deduct from a security deposit, the tenants should know the conditions under which deductions will be made as supported by language in the lease.

The balance of a security deposit (together with the security deposit settlement) must be sent to the tenant’s next address. Remember to ask the tenant to provide a forwarding address before he or she moves out. It’s also a good idea to send the settlement letter, with any returned funds, using certified mail. If the tenant later claims that he or she did not receive either, you will have clear proof that you mailed these items.

As a landlord prepares a security deposit settlement statement, and makes decisions regarding the return or retaining of funds, there should be one question on their mind.  Can I support this decision to retain these funds to a Judge?  If so, there are no concerns and expeditiously processing the security deposit settlement so all parties know these decisions, is the most important responsibility.

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