Returning or Keeping a Security Deposit?

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If you’ve been a property owner or landlord in Chicago for any significant amount of time, you probably know all about security deposits: how to store them properly, when you need to give them back (if you plan on giving them back), what constitutes normal wear and tear and what constitutes damage that should be paid for with the security deposit, and how to deal with tenants who fight your decision to withhold the deposit.

But if you’re just dipping your toes into being a landlord or owning investment properties, learning about all of it can make your head swim. At Lofty, our goal is to make your job easier, and that means teaching you everything you need to know about returning (or not) the security deposits for your properties.

Returning It? Here’s How

Generally speaking, in Illinois, security deposits must be returned to the tenant within 30 to 45 days of the lease ending. Though some states require landlords to give tenants a move-in statement that details the condition of the property, Illinois is not one of them, so it’s in your best interest to keep accurate records of the condition your properties are in when tenants move in. That way, when they vacate the unit, you can cross-check against your old notes and see if there are repairs that need to be made.

If you’re returning the deposit, be sure to make receipts for both your own records and the tenant’s, so that the tenant can’t claim you never returned it. When you return the deposit, be sure to date the receipt—though it seems like a simple detail, leaving it out on accident can come back to haunt you. Without a date on receipt, you could find yourself paying out more in fees and court costs if tenants take you to court over deposit-related conflict. If it sounds confusing, don’t worry—it kind of is. If you’re taking matters into your own hands, security deposits can be a real headache. Working with a property management company can help take away some of the stress associated with security deposit issues.

What You Need to Know About Keeping Deposits

Returning a security deposit is easy. It’s when you decide to keep some or all of it that things can get really messy. Here’s what you should know about keeping deposits.

First Things First: What Constitutes “Normal Wear and Tear”?  

Security deposits are typically kept by landlords in Chicago (and elsewhere) to cover the cost of damages and repairs. A lot of times, this is fought by tenants who claim that the damage is consistent with “normal wear and tear” on the unit. Normal wear and tear is a real thing, but in order to know whether or not something falls under that category, it’s helpful to know what’s generally considered normal wear and tear in a rental unit.

    • Flooring: Carpet gets dirty and hardwood floors can get scratched, but if a tenant leaves behind pet stains or multiple cracked tiles, or floorboards that are excessively damaged, that’s not considered normal use.
    • Walls: This is a big issue between landlords and tenants—whether holes from nails used to hang artwork or other decorations are considered normal wear and tear. And the answer tends to differ from landlord to landlord. Use your best judgment here; splitting hairs over two or three nail holes might not be worth the potential hassle of a tenant trying to take you to court for the security deposit. Holes in the wall, however, are a completely different story and should be fixed with security deposit funds.
    • Pet Damage: Things like chewed-on cabinet doors, scratches on the walls, and stains are all out of the realm of normal wear and tear in a rental. In order to plan for problems like these, many landlords choose to charge non-refundable deposits or additional pet rent.
  • Overall Cleanliness: While you might want to reconsider charging a cleaning fee for unswept floors and some light tidying, if a tenant leaves behind the remnants of a last-minute party, food in the refrigerator, and general filth, it’s more than acceptable to charge for cleaning.

The Most Common Reasons Deposits Are Kept

There are a handful of reasons that a security deposit might be withheld. They include:

  • Early termination of the lease
  • Unpaid rent
  • Money owed to the landlord for utility bills
  • Cleaning fees for dirty or un-cleaned apartments
  • Damage to property (or furniture in furnished units)

 

What Do You Have to Provide to the Tenant if You’re Keeping the Deposit?

Laws vary from state to state regarding what you need to give your tenant if you are keeping any or all of their deposit, but generally, it’s good form to provide a list of services performed or things that needed fixing/replaced and the costs associated with them. This lets the tenant know that you actually used the money for what you said you did, and that you didn’t just charge $200 to dust the baseboards.

What to Do If a Tenant Contests Your Decision

If a tenant feels that you are wrongfully withholding any or all of their deposit, they may choose to file in small claims court or even hire a personal attorney to handle the case. However, you have rights—if you are justified in keeping the deposit, you can counter-sue the tenant to ensure you don’t end up underwater with fees and costs. Going to court can be a huge pain and can cost a lot of money for all parties, though, so if it’s a minor quabble—say, over a $50 invoice for cleaning, it may be best to try and settle with the tenant to avoid a costly court case.

Getting Help When You Need It

You got into investment property ownership to make money, not to make your full-time job dealing with tenant hassles. Here at Lofty, we want to help you with every aspect of being a landlord, from finding the best tenants to answering your security deposit questions and everything in between, so that you can save time and frustration and do things you actually want to do. Contact us anytime to learn how working with a property management company can help you start living the life you deserve to live.

Speak with one of our experts to find out how we can supercharge your investment.

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