How To Calculate Security Deposit Deductions

How To Calculate Security Deposit Deductions

Excalibur Homes
Excalibur Homes

How To Calculate Security Deposit Deductions

Although this may seem relatively straightforward, taking money out of a security deposit can cause serious tensions to rise, so you have to do it tactfully and fairly. To help you avoid unnecessary conflict, read on to learn how to calculate security deposit deductions.

When Can a Landlord Deduct From the Security Deposit?

There are multiple reasons why a landlord can deduct or keep money from a security deposit, with damaged caused by the tenant being one of the most common reasons. However, it can be challenging to determine what is or isn’t considered tenant damage, which we will go over later. To avoid these disagreements, it’s best to conduct a move-in and move-out walkthrough and require a signature that the tenant agrees with your evaluation of the property. Other reasons a landlord could deduct from a deposit would be a break in the lease agreement, such as refusing to pay rent or utility bills, or to cover cleaning costs.

Damage vs. Normal Wear and Tear

To deduct the correct amount from a security deposit, you must know the difference between damages caused by the tenant and normal wear and tear. It is up to the landlord to handle the maintenance and cosmetic upkeep fees of everyday living to provide adequate housing. But if the tenant does the damage, it is not the landlord’s responsibility to pay for repair. If you accidentally charge for normal wear and tear, you leave yourself open to litigation, as this can harm a tenant’s future credit and ability to rent.

Normal wear and tear is the natural deterioration that occurs from everyday living. Some common examples of normal wear and tear that the landlord is financially responsible for are:

  • Small nicks on walls or tiny holes from hanging pictures
  • Warped doors or windows from fluctuations in moisture and temperature
  • Utilities that need updating due to normal usage
  • Replacement of batteries, especially for safety measures like smoke detectors
  • Worn-down rugs or flooring in high-traffic areas of the home

However, the tenant must pay for any damage caused by their negligence or misuse. As stated previously, the tenant can argue whether the damage was their fault, which makes record keeping a critical part of not losing money. Some examples of damage that the tenant may be liable to repair are:

  • Large gouges or scuffs on the floor
  • Excessive holes or wall damage
  • Unapproved alterations to the property
  • Missing items such as screens, utilities, doorknobs, etc.
  • Anything that gets broken or damaged as the direct result of tenant misuse or failure to report issues that result in worsening damages

What Are Abnormal Cleaning Costs?

While determining whether a tenant caused the damage can be tricky, determining whether the property is excessively dirty due to tenant negligence is a little easier. Additionally, a filthy unit can lead to damage, so the two often bleed together. Occasionally, a tenant will dirty a property on purpose. A tenant is rarely so dirty that you must call a specialized crew to do the job. However, homes can naturally become a little unclean, and it will be up to the landlord to clean it or hire someone to do the job.

Some common examples of dirty homes that the landlord is responsible for are:

  • Dusty utilities or cobwebs
  • Infestations due to landlord negligence
  • Dirty grout, especially in high-traffic areas
  • Normal accumulations of mold and mildew, especially on bathroom appliances

Again, you’ll have to use your best judgment to determine what is and isn’t considered excessive filthiness. However, it’s typically easy to determine when a property is excessively filthy to the point where you’ll need to take money out of the security deposit. Some situations that the tenant is financially responsible for are:

  • Stains on walls or carpet due to tenant negligence
  • Infestations from uncleanliness
  • Hazardous chemicals
  • Rotting food
  • Junk or trash that is blocking filtration systems, emergency exits, or walkways

Most of the time, an excessively dirty unit will be foul-smelling or pose a health hazard. If you cannot clean this alone, or the amount of work and money it will take to clean the unit is unreasonable, you can take the amount out of the security deposit.

What Constitutes a Lease Break?

If a tenant breaks a clause they agreed to when signing your lease agreement, this is a lease break. Often, these lease breaks cause the landlord money. Some of the most common forms of a lease agreement break that can cost you money are:

  • Unpaid rent or utility bills
  • Ending the lease early
  • Illegal activities
  • Noise violations
  • Any other breach of clauses specifically stated in the signed agreement

These examples can cost you a lot of money, especially if a tenant habitually pays you late. And in truth, if a tenant is not paying their bills, informing them that you will deduct the amount from their security deposit is the first step. Additionally, if a tenant ends the lease early on illegal grounds, it’s their responsibility to pay for rent until the end of the lease, even if they’re not living there. For example, if a tenant ends their lease with four months left, and the rent is $1,800 per month, they’re responsible for paying you the $7,200 owed.

You can also deduct from a deposit if a tenant has unauthorized long-term guests. These guests can quickly raise utility bills and cause more than the expected wear and tear to the property. While you should write the policy into your lease agreement, you can inform them that you will take out a certain monthly amount if the guest does not vacate the property.

How Much Should You Take Out of the Security Deposit?

When calculating how much to take out of a security deposit, sometimes the deposit alone won’t cover the damages. The tenant is responsible for paying those fees, and you can take them to court if they don’t pay. So, when you’re ready to start deciding how much to charge, here’s what you should factor in:

  • How much did cleaning or repair products/personnel cost you?
  • How much money did you lose due to tenant vacancy?
  • How much money did you lose/spend due to negligence or misuse?
  • How much time did you spend dealing with the issues the tenant caused?

Remember, while it may be easy to lead with your emotions and charge an unfair amount, it will only hurt you in the end. Being a landlord is a business; in these cases, it’s best to treat it as such, or you may spend more money paying legal fees.

Now that you know how to calculate security deposit deductions, you can reasonably determine how much to take out of a deposit and when to charge more. If you’re struggling to manage any day-to-day landlord responsibilities and have a home for rent in Decatur, GA, Excalibur Homes is here to help. We have a team of experienced and knowledgeable property managers dedicated to making your life as a landlord a little easier.

How To Calculate Security Deposit Deductions

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