Blog Layout

5 Mistakes Landlords Make with Security Deposits.
Anthony Luna • Feb 25, 2021

Mistakes Landlords Make with Security Deposits

 

Security deposits are a vital but often neglected part of being a landlord. Security Deposits can offset the financial burden caused by damages due to a previous tenant when done correctly. Security Deposits can also cover missed or past due payments. We have put together a list of five common mistakes landlords make and how to avoid them. 

 

 
1.   Failing to understand the law. 

 

Understanding the laws in place when it comes to security deposits can be a real benefit. Each state has specific regulations. A landlord has only 21 days in California until the security deposit must be fully refunded for residential tenants. Failure to do so often results in a lawsuit on behalf of the tenant and eventually leads to a small claims court appearance. There must be a follow-up letter explaining why or an itemized bill displaying the deductions taken to pay for damages. This letter is often referred to as a disposition letter. 

 
2.   Not using security deposits properly. 
 

The basics of a security deposit are common knowledge, but you would be surprised how often landlords misuse security deposit funds. Deductions from a security deposit can be taken for multiple reasons. The first is severe damage done by the tenant during their time using the property or leaving it to maintain the property in a presentable state. The second reason is to cover unpaid rent, lastly, for absolutely needed cleaning services and not for upgrading appliances. Typically, the security deposit cannot be used for any other charges unless agreed to in writing. 


3.  Overcharging. 
 

Charging for the wrong reasons is another instance that could cause you to end up in  small claims court. Often Landlords associate normal wear and tear done by merely living in a home with damages. When this happens, tenants might be motivated to pursue legal action. If a court determines a landlord has misused security deposit funds, the landlord may be forced to repay the amount with additional penalties. 


4.  Lack of documents. 
 

Having the right documents can go a long way. First, a lease agreement sets the basis for your relationship with your tenant. A lease agreement should be as specific as possible to avoid any misunderstandings. A written security deposit policy should identify reasons why you may retain their deposit within the lease agreement. Documentation of these violations along with any money transacted on behalf of it is crucial. 

 

5. A poorly screened tenant will cost you. 

 

Lastly, at the root of most security deposit issues is the lack of screening a potential renter thoroughly before becoming a tenant.  A proper screening  abides by laws protecting tenants and lets you know who you are renting to. A tenant who was not adequately screened will cost you money by giving rent late, neglecting and damaging the property, and more. 

Property

Management Made Easy

Customized Pricing Plan to Help You Maximize Your Investment Returns

EXPLORE OUR PROVEN METHOD

Take the First Step Towards Effortless Property Management

Take the First Step Towards Effortless Property Management

By Tayz Onofa 09 Feb, 2024
In an exciting milestone for Coastline Equity and its CEO, Anthony A. Luna, we are pleased to announce his recent appointment to the National Small Business Association (NSBA) Leadership Council.
Coastline Equity, Pod System, Modern Property Management, Resident Experience
By Anthony A. Luna 26 Jan, 2024
Pod System
By Anthony A. Luna 13 Nov, 2023
Adapting to a Shifting Landscape: Strategies for Commercial Property Owners Amidst Rite Aid's Restructuring
By Anthony A. Luna 06 Nov, 2023
Elimination of Credit History Screenings for Voucher Holders
By Anthony A. Luna 16 Oct, 2023
What is happening with Property Insurance Costs?
By Anthony A. Luna 14 Oct, 2023
Navigating the New Landscape: How AB 12 Impacts Landlords and Tenants in California
By Anthony A. Luna 12 Oct, 2023
The Third Time is Not the Charm
By Anthony Luna 27 Sep, 2023
This is a subtitle for your new post
By Anthony Luna 21 Sep, 2023
Discover the legacy of excellence, innovation, and community-centric approach that defines Coastline Equity. Learn how we are pioneering excellence in property management, guided by the visionary leadership of Anthony Luna, Chief Executive Officer of Coastline Equity.
By Anthony Luna 20 Sep, 2023
As the world of real estate continues to evolve, investing in commercial property has emerged as a lucrative avenue for maximizing returns. Using a design and build company for the interior of the space combines the elements of thoughtful design and efficient construction to create spaces that not only look great but also function effectively.
More Posts
Share by: