The Return of Security Deposits In Residential Leases
The return of security deposits at the termination of residential leases is a source of a great deal of litigation. The rules are important for landlords and tenants alike to remember and if violated, can have serious monetary consequences, such as the landlord being liable for triple the amount of the security deposit plus attorney’s fees. A few important rules, often overlooked or forgotten, are as follows:
Receipt for security deposits: Landlords must give a written receipt for the security deposit. This may be done as part of the lease itself.
Interest: Security deposits are required to be deposited in federally insured financial institutions and accrue interest at the rate of 3% per annum. However, the interest only accrues every six months. Thus, for example, if the term of the lease was 9 months, only 6 months of interest is due. Interest is not compounded.
45 days to return: Security deposits and accrued interest, less any deductions, must be returned within 45 days after the end of the tenancy.
Deductions from security deposit: If any of the security deposit is withheld, within 45 days from the end of the tenancy the landlord must mail a letter via first-class mail to the last known address of the tenant listing the damages claimed as deductions. Deductions from security deposit may be made for unpaid rent, damage due to breach of lease or for damage by the tenant in excess of ordinary wear and tear to the leased premises, common areas, major appliances, and furnishings owned by the landlord.
Walk-through at end of lease: In order to protect the right to be present for the landlord’s walk-through of the premises at the end of a lease, the tenant must send notice at least 15 days prior to moving out by certified mail to the landlord of his or her intention to move out, the moving date, and his or her new address. The landlord then must send via certified mail notice of the final inspection, which must occur within five days before or five days after the date of moving as designated in the tenant’s notice.
Compliance with these and the other laws surrounding security deposits will greatly facilitate the termination of leases in an amicable fashion and hopefully reduce time spent litigating these issues in court. Should you have any questions regarding security deposits or residential leases in general, do not hesitate to contact Dugan, McKissick & Longmore, LLC.
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