Hi I’m Yuriy Skripnichenko with TrustArt Realty,
If you own a rental property one of the most difficult things to figure out is how to return security deposit and how to hold security deposit properly.
We’ve heard many times property owners and investors say that when you have a tenant moving in you will receive 3 months’ worth of rents. This is simply wrong and incorrect. Security deposit and last month rent is not your money. It is tenant’s money and they have to be kept in escrow account until they are due. Meaning that last month’s rent can be used ONLY for last month rent payment and security deposit can be touched only when the lease ends and tenants move out.
So how do you return security deposits? If you’re a property owner you have questions on this and questions on how much you can keep out of the deposit. We see these questions all the time from owner asking: how much can I deduct from my tenant security deposit? Or what can I not deduct?
There are a few things to know and consider when you return deposits. 1st is that PA law calls for the deposit to be distributed within 30-days of the tenant moving out of the property. If you do not return security deposit within 30-day you may be liable to pay the tenant double of the amount for the original security deposit. You also need to provide the tenant with a list of damaged that you are deducting money for and return the reminder of the deposit within the same 30-day period.
2nd thing to be aware of is wear and tear vs damage. You need to understand what is considered wear and tear. And if items consider wear and tear you cannot deduct these repairs out of the security deposit. Nail holes in the wall, faded paint, some dirtiness, faded and failed caulking. It also depends on how long the tenant staid at the property. If you tenant stayed for 10 years and your carpet is damaged you cannot deduct for this because the lifetime of carpet is not going to exceed 10 years. And for a lot of items such as appliances, blinds, carpets and more you won’t be able to deduct 100% of the replacement cost even if tenant staid only for a year. You will need to depreciate that time over certain number of years and deduct the amount minus depreciation for the time that tenant lived at the property.
Philadelphia judges are very tenant friendly. So, make sure to document everything very well, have all of your lease documents in place, have deposits saved in escrow accounts to be prepared to defend if you have to go to court with tenants.
If you are in doubts what you can or cannot deduct out of your security deposit consult with professionals.
If you are not having us do that for you give us a call at 267-929-1500 or fill out a contact form at trustartrealty.com. We’d be glad to talk to you and give you some guidance.