As A Landlord, When Should You Return Renter Deposits?

Renter deposits can be an area of debate for landlords. Some property owners make the deposits high with the thought to keep all of it. Other landlords are new and have no idea where to even begin. They don’t know best practices or processes, so how what are the most important tips when it comes to tenant deposit returns.

Renter dynamics

Tenants usually leave one home or unit to rent another. Most individuals do not have extra cash lying around to put deposits in different places. The money that they hope to get back from their deposit from you, is money that they will want to use to move into the next rental unit. That money is important, and whether they end up on the streets or in a hotel because you didn’t give them the deposit back (although not your problem), is something to think about.

Understand deductions

In the lease agreement, in needs to clearly state terms regarding in what scenarios you will deduct from the deposit refund. Those terms usually deal with elements beyond reasonable wear of a property. Things can get weird if you have a tenant who stays when you take over as a new owner of a property or if the renter has stayed in the same place for years at a time.

It’s important that you walk-through with the sellers if you are buying a property. If you have concerns over the place, talk about the points then. There is a difference over normal use during the first year or the second year. If the same tenant has occupied a space for a few years, there could be spots on the carpet, cabinet doors that need to be replaced, or paint that is chipped and peeling. If you try to stretch what is normal wear-and-tear, your tenant could take you to small claims court. It could be a good idea to be cautious as opposed to making a big deal over every little thing.

Know the laws

As a landlord, you will need to keep up-to-date on landlord-tenant laws. There may be limits in your area for how much money you can ask for from a tenant towards a deposit. There could also be a set schedule when you will need to give back the money when the tenant moves out. As a property owner, you should shoot to meet all timelines and communicate any changes to the return of the deposit if they arise. Keep records of any deductions

Look for any damages

Just because you are considering what is best for your tenant and their situation, you can’t be blind to any damage that has happened. Don’t pay out of pocket for things that you shouldn’t and make sure you do inspections is a reasonable amount of time. Keep records from when the renter moved in. Videos and photos are a great way to make comparisons. Nowadays, you can very easily store data online. When you manage rentals for others or have partners, the records you keep matter.

You have a reputation

Bad reputations go before you. Landlords might forget about online reviewing systems. If your reputation goes south because you don’t return deposits, no one will make an effort to keep up the unit. They might decide not to pay the last month’s rent. Renters will simply determine that you are going to keep their deposit and do what they can to “win.”


Generally, you have about thirty days to give a deposit back to a renter or explain why you aren’t doing that. It might not be a good idea to abuse that. At my company, we do a walkthrough with the tenant when they move out; not after but during the process. At this time, we look over the property to be sure that there is not more damage than is to be expected. If there are questions, we can talk about them immediately. This decreases the chances of debate over what happens if you do keep the security deposit to cover your costs. In-person talks are important because it sets the stage of expectations right away, creates efficient business, and helps you avoid legal problems from irate tenants.

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