How Should You Return the Security Deposit at the End of the Tenancy?
You have had a resident follow the proper protocol you outlined in your written lease agreement to give you proper Notice To Quit. Things are ending amiably with a great resident, probably buying a new house for their family, but regardless, they are moving out of your rental and you currently hold a Security Deposit.
What do you do now?
Below we have outlined the steps you need to take to safely and securely return the remaining Security Deposit back to your resident when they move out of your rental property.
Disclaimer: Before we continue, we must state that this information is for educational purposes only, although these are the steps required under MGL 185 ss15B, we are not attorneys, nor are we engaged in rendering legal advise. We strongly urge you to seek legal counsel if you are unsure about these steps or have legitimate legal questions that you feel must be addressed before proceeding. We further advise you, those rental properties, as with all other types of financial institutional investment strategies pose serious risk of losing some or all of your investment.
Security Deposits at the end of the Residency
- Before the last day of the tenancy, schedule a walk through to identify any damages beyond normal wear and tear and review these with the resident
- Give the resident the opportunity to resolve, clean, or repair these issues
- Use the Statement of Condition form previously filled out as a guideline to compare and record any damages
- Take lots of pictures of the condition of the apartment
- Get a forwarding address to send the Security Deposit statement
- On the last day, walk through again, get the keys, and have the resident sign a statement that they have moved out
- You now have no more than 30 days to repair, clean, document and restore any issues in the property
- You MUST return a Move Out Statement of Condition form to the resident within 30 days, no more
- You MUST give an accounting of the escrow account, plus interest
- You MUST give a written accounting of any and all repair costs accompanied by receipts for out-of-pocket cleaning expenses or professional cleaning services
- You CANNOT charge the resident for your own personal time or labor to clean or repair the unit
- You must return ALL deposits, plus interest, minus and expenses back to the resident within 30 days, no a day more
- Your Statement of Security Deposit Receipt MUST have the written language on it, “signed under pains and penalties of perjury”.
Document EVERYTHING!
You cannot skip a beat here. The dates are critical and missing just one day can have you paying triple damages to the resident. This checklist is one of the main reasons some landlords do not bother with even collecting Security Deposits. But handled properly, they can indemnify you from damages left behind when the resident moves out.
Finally, most important are the details in returning the deposit. We typically will only use a bank cashier’s check for the amount of the deposit plus interest. This is a good check system because we put up the funds up front to purchase it at our bank. The resident receiving can cash it and use it right away too. No need for them to wait for the check to clear. Most of the time a resident is counting on the return of their deposit to pay for moving expenses into or deposits for their new apartment, so this is really critical you get it right the first time. An irate resident is not worth the trouble of a clerical error.
Sufficient funds, a bank check, and make sure you send it back with tracking information. We just had an instance where we sent back the check early to a resident and they moved out before they got the mail so no one was there to sign for the letter. Luckily, we did certified mail tracking and a signature required so it was eventually returned to us.
The bad news is that it took over a month to get that check back. So technically, we were in violation of the 30-Day return of the Security Deposit. We have since met with the resident to reimburse them for the error, but we will hold onto that returned letter “unopened” forever to prove that we were in full compliance with the return dates by statute. The returned envelope serves as a Federal document, time dated and stamped by the government to prove that we were in compliance. But we can never open that letter. Should we ever need to go to court on the matter, the judge will open it at the hearing to verify the contents.
In our next posts we will walk you through the checklists for taking care of Security Deposit in an existing building you are acquiring with existing residents. In the meantime, please take advantage of our Free Report for Landlords on the “Top 10 Tip To Find The Best Property Manager”. A good property manager can help to manage your property and keep your apartments rented. A great property manager can propel your rental business and help you to grow your rental portfolio and enhance your business operations. Find out how.
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Warmest regards,
Brian Lucier
Belaire Property Management
Regional Property Manager
(978) 448-0669 office
info@belaire.co
www.belaire.co
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