BAD SECURITY DEPOSIT HABITS

Everybody knows about security deposits, right? You’ve been handling them for so long; you could do them in your sleep. Nothing new to learn. Yikes – Sounds like a situation ripe for a crisis. Although you learned the basics when you started your career, bad habits may have crept into your repertoire.

Security deposits are handled by every property manager. The basics are learned when one starts in the business and then, for the most part, forgotten as habits become learned. Complacency is dangerous, for some of the procedures that become ingrained are simply wrong. Here are a few “bad notions” to be corrected.

“We use the deposit for repairs during the tenancy if the resident caused damages.”

The deposit can only be disbursed or used after the resident has vacated and the claims process has been followed. Never can the manager use part of the deposit to do repairs during the tenancy. Never can the manager start cutting checks from the deposit before the claims process has run its course.

The only exception is if both the manager and the resident sign an agreement for the deposit to be used in this manner. Even if the parties are willing to sign such an agreement, the manager needs to consider whether this is a wise move. Certainly, it allows for a “band-aid” fix to an immediate problem, but it also depletes the reserve for other crises that may arise down the line.

 “We Don’t Send a Claim if the Resident Didn’t Give Us a Forwarding Address.”

The statute requires the manager to send a claim on the deposit no later than 30 days after the resident has vacated. The statute also says, in a situation where the resident vacates the premises early, the claim only has to be sent if the resident gave the manager a forwarding address seven days before the resident vacated. Sounds like a great loophole. It’s not. It should never be relied upon.

Every time a resident vacates, a claim on the security deposit should be sent. It should be sent to the last known address, even if that is the unit he just vacated.

The problem with the “loophole” is it contains its own loopholes, making it very difficult for folks (including judges!) to figure out. It is far better to spend the money for the mailing, than to risk being forced to return the security deposit.

“We Don’t Send a Claim if the Resident Was Evicted.”

An eviction does not mean the resident automatically forfeits her security deposit. Even though a resident was evicted, she is entitled to receive the claim you are making against her deposit.

Every time a resident vacates, a claim on the security deposit should be sent. This is true whether the resident vacates under a writ of possession or surrenders keys four months before the lease expires.

It is common that a resident who was evicted “used up” all of the security deposit. Typically, the resident owes more than the amount of the security deposit. Nonetheless, a claim must be made on the deposit.

“We don’t send a claim if the resident told us to keep the security deposit.” Sometimes a resident will orally tell the manager to keep the deposit. “Use it for what I owe you.” No matter how much you trust the resident’s word, send the claim on the security deposit.

Every time a resident vacates, a claim on the security deposit should be sent. Even if the resident consents to the manager keeping the deposit, the resident is still entitled to receive a claim on the deposit.

Oral directions are only as good as the paper they are written on. They give no protection to the manager.

In addition, if there is more than one resident on the lease, getting the “go ahead” from one resident simply cannot waive the rights of the other residents. Send the claim to all the residents on the lease.