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Demystifying the Dispositions Department

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You collect a security deposit when a tenant moves in. When they eventually move out, you run a quick walk-through of the rental, and if everything seems to be in decent shape, you return the tenant's security deposit.

Security deposits are a straightforward and simple process, right?

If only that were the case!

The fact is that when it comes to security deposits, it's often largely a case of he said/she said. Usually, tenants will expect their deposits back, no matter what condition they left the property in. Landlords, on the other hand, will most often want to apply the deposit to any wear or damages at the rental -often holding onto the deposit for as long as possible, at least until they've had a chance to thoroughly inspect the unit.

If you're a landlord who's uncertain about how exactly security deposits work, you're not alone. Handling security deposits can be a complicated endeavor, and one that varies considerably according to state law.

At Renters Warehouse, we have an entire department that's dedicated to the processing of security deposits. Our team in the Security Deposit Dispositions Department handles the return of security deposits full time. We work hard to ensure that we fairly process the security deposit -to determine if it should go toward repairs and damages, as well as outstanding rent, or whether it will go back to the tenant.

If you're curious about what goes on when we process the security deposit, here's a look at what happens behind the scenes in the Dispositions Department.

Conduct Inspections

There should have been an initial inspection when the tenant originally moved in. When they move out, another inspection takes place. During this inspection, our team will ensure that the rental is in the same condition that you rented it in, aside from normal wear and tear. During this time, the leasing agent will inspect the property with the tenants, looking for signs of damage. The condition will be noted in writing, and we will also take video documentation. At this point, our leasing agent will also obtain a forwarding address from the tenant to send the security deposit to.

Identify Any Damages

Once the inspection has been performed, all of the notes and the walkthrough video will then be turned over to our Security Deposit Dispositions Department. They will review the video and the notes, and use them to form a list of recommended deductions for the security deposit.

Damages that are usually considered to be beyond normal wear and tear include:

    • Holes in plaster or damage to walls

    • Stained carpet, or flooring that has tears, gouges, holes, or burn marks

    • Broken windows and damaged window screens

    • Broken or damaged doors and locks

    • Appliances that were damaged by misuse

    • Clogged drains from misuse

    • Damaged or missing window blinds

    • Pest infestations that require extermination

    • Broken fixtures in the bathrooms

    • Excessive mildew in bathroom

In addition to damages, the security deposit can also be held for cleaning of the unit -especially if it was excessively dirty -for example, if there was trash left behind or excessive dirt and grime in the kitchens and bathrooms.

After we've created a list of recommended deductions, we will then relay it to you, allowing you to agree to the deductions, or inform us of anything else that you feel should be deducted.

Work With the Owner to Determine if There Are Any Outstanding Balances

Next, the Dispositions Department will work with you to determine if there is any unpaid rent, or if applicable, utility bills, that are still owed by the tenant. If there is an outstanding balance, then we will hold the security deposit, and apply it towards that.

Process the Financials

Our Dispositions Department will get in touch with contractors to obtain an estimate for repairs on any damage that is above and beyond normal wear and tear. Once all of the estimates have been collected, and you're in agreement with the amount that will be deducted, the Dispositions Department will send the tenants a security deposit disposition letter, outlining why the security deposit, either in part or in full, was withheld.

Send Payment to the Tenant / Owner

Finally, the respective payments will be sent to the tenant and the landlord. If there is outstanding rent owed, or if any damages occurred while the tenants were in the rental, and they go above and beyond normal wear and tear, then the cost to repair the damages will be deducted from the security deposit, to cover the cost of the repairs. If there are no damages, the security deposit will be returned in full to the tenant. While the amount of time that a landlord has to return the security deposit to the tenant varies from state to state, for most areas, the timeframe is 30-days. In Minnesota, landlords have three weeks in most cases, after the tenant leaves, and the landlord receives mailing address, to return the tenant's deposit.

While security deposits may seem straightforward, there's a reason that disputes regarding security deposits are one of the most common causes for landlords and tenants to end up in court. Since what constitutes normal wear and tear, and what goes above and beyond isn't always clear, there's potential for landlords and tenants to disagree. For this reason, it's important to have walk-through inspections and procedures that document the original state of the rental, and again, another walk-through when the tenant leaves. We find that having video evidence taken at the time of the initial inspection to be invaluable when it comes to proving the original condition of the property. It offers irrefutable proof of the way the rental was, and helps to settle disputes about damages.

Finally, always make sure you protect yourself and your interests with an airtight lease. Having a rental agreement that outlines your process for handling security deposits helps to keep everyone on the same page, and is invaluable should you ever find yourself having to prove your case before a judge.

At Renters Warehouse, we offer professional property management services that can help to simplify every aspect of property management from tenant sourcing and screening to security deposit dispositions. Get in touch with one of our Rent Estate Advisors today!

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