If you own or manage rental houses in Georgia, it would be a good idea to review 44-7-31, 44-7-33, 44-7-34, 44-7-35, and 44-7-36.
Let’s start with 44-7-36 which says “Code Sections 44-7-31, 44-7-32, 44-7-33, and 44-7-35 shall not apply to rental units which are owned by a natural person if such natural person, his or her spouse, and his or her minor children collectively own ten or fewer rental units …”. First take note of the word “units”. Two quadruplexes and a duplex equal 10 units. It does not say 10 properties. Second note the term “natural person”. Neither an LLC nor a corporation are a natural person. Many landlords choose to place their properties in the name of an LLC or corporation to reduce liability. While that could be a very good idea, it also makes the landlord subject to all of the security deposit requirements of a licensed broker as listed in the other code sections.
Under 44-7-31 you are required to keep the security deposit in a separate trust account in a bank that offers insured deposits (like FDIC) and you must notify the tenant which bank is holding their deposit.
44-7-33 contains many more requirements and I urge you to read thru it carefully. To start, you must provide the tenant with a copy of the move in inspection before accepting their security deposit. Many landlords, and some property managers, will provide the tenant with a blank copy of the move in inspection and tell the tenant to complete the inspection and return it to the landlord or agent. Their thinking is, “if the tenant never returns the inspection, when they move out I can write up whatever damages I want”. That thinking is 180 degrees off. If you charge the tenant for damages at move out, and the tenant takes you to court under a Wrongfully Withholding the Security Deposit complaint, one of the first things the judge is going to want to see is the move in and move out inspection. If the landlord can’t produce the move in inspection, it is highly likely that the judge will disallow any charges to the security deposit for damages because the landlord can’t prove that the property wasn’t in that condition at the time of the move in inspection. So it is very important that the landlord perform a written move in inspection before the tenant moves in.
Second, 44-7-33 requires the landlord (or their agent) to perform the move out inspection within 3 business days of the termination of the occupancy. It goes in to say “and compile a comprehensive list of any damage done to the premises which is the basis for any charge against the security deposit and the estimated dollar value of such damage.” So at the time you perform the move out inspection, not only do you need to note anything that you consider tenant damage, you also have to note your estimate for the amount of the damage. Be prepared for your tenant to dispute your “estimate”.
TECHNIQUE: When you meet the tenant to perform the move out inspection, let them know in advance that you are going to note anything that is wrong with the property. Inform them that they should wait until you are done to discuss any issues because, while you are noting the condition of the property, you are not necessarily saying they are liable for the work to be done. Some of your notations may be related to wear and tear issues. When you do note issues that you believe are related to tenant damage, start by showing the tenant that the issue was not noted that way on the move in inspection. Explain to the tenant that since you are not a contractor you are going to estimate the cost to repair on the high side at this inspection appointment. Once you get the contractors invoice for the work, before returning the balance of the security deposit, then you can reduce the amount of the charge and increase the amount of the refund. But judges do not like to see landlords increase the amount of the charge after the move out inspection. By explaining these things to your tenant in advance you will reduce the number and intensity of the disputes you might have otherwise.
44-7-34 applies to ALL landlords. In short, after the tenant vacates the property you have one month (30 calendar days) to return the security deposit and/or your statement detailing any deductions made from the deposit for damages that are a result of the tenant’s abuse or neglect of the property or unpaid charges. You can’t charge the tenant for normal wear & tear (separate BLOG post). The deposit may also have been applied toward unpaid rent. Just make sure you include your accounting statement with the letter and any applicable refund check. Make sure you get the letter and any applicable refund out on time or 44-7-35 may become applicable. If you mail a refund to the tenant, and the tenant does not cash the check for 90 days, then that money just became the landlord’s under 44-7-34 (Georgia is a great place to own rental property!)
44-7-35 doesn’t apply to those landlords listed as exceptions in 44-7-36 (above) but it applies to many individual landlords and ALL property managers. In short, if you don’t send the letter, accounting, and any applicable refund back to the tenant within a month from the day they vacated the property, then the court could hold you responsible for paying the tenant 3 times the amount of the security deposit withheld.