Security Deposits and Renters’ Rights

Property managers and landlords around most rental communities in the United States are legally allowed to require what’s known as a security deposit. The purpose of the security deposit is for the landlord to hold onto if the occasion arises that repairs or cleaning are required after the tenant vacates the property and it was left excessively unclean or otherwise damaged. Tenants have their own unique rights, often known as “renter deposit rights.” Property managers, property owners, rental agencies, and so forth must all act in accordance with these rights unless they risk relinquishing their own rights and become vulnerable to legal action.


Security/Damage Deposits and The Law

A renter’s deposit rights vary from state to state and jurisdiction to jurisdiction, meaning that local ordinances will dictate the specifics. As this article is not a legal document, it’s best to contact your local seat of government and/or federal advocacy agency to learn more about your specific rights as a property renter under the law. Its purpose is to provide context and some level of understanding of such dynamics. 


A Renter’s Right to Security Deposit Interest

Most jurisdictions don’t specify a type of account that landlords must use to hold security deposits. For example, one can choose to place a deposit into an escrow account. As escrow accounts are typically non-interest generating, the landlord doesn’t have any additional fiscal responsibility to their tenants until they move out. However, the situation changes when a landlord stores security deposits or damage deposits in an account that does generate interest. By law, security or damage deposits are the properties of the tenants that pay them, not the landlord that collects them. This means that landlords collecting interest from accounts that generate it using money collected from security or damage deposits must give that interest to their tenant each month. Landlords are typically allowed to charge an administrative fee, and they usually opt to deduct the accrued interest from the owed rent rather than make a payment to tenants. 


A Renter’s Right to Normal Wear and Tear

Renter deposit rights include rights to typical wear and tear on the property. Laws involving such rights are concise, using words such as normal, typical, ordinary, and the like to define what a tenant is allowed to claim as expected wear and tear. This style of wording gives judges some wiggle room to make decisions on a case-by-case basis. When making determinations as a property management company, the two most weighty factors are the activities that resulted in the wear and tear and if the material that’s been worn away or damaged has an expected limited life span. A good example of this would be worn carpets in areas of high foot traffic. Walking around the house is normal behavior, and carpets typically have a limited life span. On the other hand, hardwood flooring that has large gashes in them that aren’t created by normal daily activities would be an example of damage caused by a tenant.

Some other examples of ordinary wear and tear are:

  • worn locks and hinges
  • small holes in walls
  • frayed strings on blinds
  • scuffed flooring
  • fading paint 


A Tenant’s Right to a Move-Out Inspection

Several jurisdictions give renters rights to a move-out inspection. The renter can request it, and some landlords actively offer and suggest them because they help to avoid disagreements further down the road. If the law requires it, failure to comply with such a request from a renter means that the landlord relinquishes any rights to the renter’s deposit. Even in jurisdictions where it’s not demanded by law, a failure to comply with a move-out inspection request will weaken a landlord’s position in court should they find themselves arguing their case there. During move-out inspections, both the tenant and the landlord will be able to be present to discuss any damage or wear and to document the process. If there are any discrepancies in expectations and outcomes, they can be negotiated at this time rather than be settled in court. If no compromise can be reached, moving forward with legal proceedings is typically the next step. 


A Tenant’s Right to Their Security Deposit

Most jurisdictions require landlords to follow through on their damage deposit requirements within 30 days. Different states and jurisdictions will have different spans of time from when the tenant moves out for the landlord to provide them with their full security deposit. This typically is not limited to business days, meaning that the countdown will count holidays and weekends. Although extenuating circumstances can be acknowledged in court, the landlord is required to pay interest on security deposits kept for longer than the allotted time given to return the said deposit to the tenant. Different jurisdictions may enforce other penalties on top of this as well. 


A Renter’s Rights to Information in Lieu of a Full Deposit

If a tenant doesn’t receive their full deposit within the timeframe established by their local legal codes, the ex-renter has a right to information about why their funds are being withheld. Landlords must inform ex-renters why they’re holding their deposit as well as provide an itemized deduction sheet for repairs and item replacements. Such documents are typically delivered to the other party in some form of certified manner within the same amount of time. For example, if a landlord has 30 days to return their tenant’s security deposit, then they will have 30 days to provide an itemized list for any deductions made. 


A Tenant’s Rights to Dispute a Landlord’s Decision

Landlords and property managers have the right to claim a portion or the entirety of a security or damage deposit, but the decision can be challenged by the tenant. Typically this means that a tenant will file in a small claims court in order to sue for the return of their deposit, any interest, and more fees such as court costs. If a judge deems that a property manager acted in bad faith, the penalty can result in the landlord paying far more than the amount of the security or damage deposit. Any dollar amount surpassing a certain limit set by the local legal codes can be claimed and sued for in a superior court where landlords have an increased burden of proof that withholding the money is necessary.