When new tenants move in, landlords will not only collect rent, they will also collect a security deposit. Depending on what state you live in, different laws will govern this deposit. From how you store the money to what you pay back to the tenants, a security deposit is heavily regulated by the law.
In Colorado for example, a security deposit is defined by the following:
“Also called a damage deposit, a security deposit is a tenant’s advance payment of money to the landlord to secure against future lease violations by the tenant, including nonpayment of rent and property damage beyond ordinary wear and tear”
This latter part of the deposit definition is the part that many landlords find confusing. Whether or not someone paid rent is fairly black and white, however, “property damage beyond ordinary wear and tear,” leaves a lot to the imagination. How can you determine what is due to tenant negligence versus normal wear and tear? Some tenants will argue that the gouges in your hardwood floor are just a part of everyday use, but is it true?
Find out what the law has to say about wear and tear and learn more about how you can best handle security deposits during move-out.
What Is “Normal Wear And Tear”?
In some situations, it is easy to distinguish between normal wear and tear versus tenant negligence.
For example, imagine that your property has an old door, painted blue years before you purchased the property. At the time of move out, you notice the paint is starting to fade and peel. It’s pretty apparent in this situation that the peeling paint wasn’t your tenant’s fault. It was a natural progression of wear and tear. Conversely, if at move out the door has a giant hole in the middle where the tenant kicked the door during a fight, you can easily see this as tenant abuse to the property.
Not all cases are as cut and dry as the above, though. For a hard, fast definition of wear and tear, you can look to your local law. In Colorado, the state defines normal wear and tear as “deterioration which occurs based upon the use for which the rental unit is intended, without negligence, carelessness, accident or abuse of the premises or equipment . . . by the tenant or . . . household or . . . guests.”
The Takeaway: To be classified as normal wear and tear, the damage should be correlated to normal, everyday use. To be classified beyond normal wear and tear, the damage must be caused by irresponsible unintentional actions or irresponsible intentional actions.
Real Life Examples Of Wear And Tear Vs. Tenant Damages
When it comes to wear and tear, the costs for repairing items covered under this fall on the landlord. Repairing wear and tear is considered a business expense of operating as a landlord. When one tenant leaves and you are preparing for a new tenant to move in, the following are examples as outlined by HUD that might fall under normal wear and tear versus tenant damage.
How To Handle Deducting For Damages
Ultimately, you need to ensure you are following all local laws in regards to a security deposit before you take any drastic measures. If a tenant has damaged your property and you need to retain some of their deposit, it is important that you create an itemized and detailed list demonstrating why you kept the amount you did.
This security deposit settlement form should start with the total amount you received from the tenant with every deduction listed below it and the final balance due to the tenant. Items on the list might include the following:
- Pet damages
- Major repairs
- Extra cleaning costs
- Missing fixtures or appliances
- Damaged fixtures or appliances
- Unpaid rent
For an example of what the form might look like, check out this sample below. For landlords who join TurboTenant, access to free forms is available through our Landlord Toolbox.
Landlord Software & Landlord Solutions
Dealing with the process of tenants moving out and moving in can become time consuming and complex. Here at TurboTenant, we are a team of real landlords who constantly look to find better solutions for common problems landlords face. We built our free landlord software as a method to manage our own properties, as well as to help other landlords in need of easier solutions. Our landlord software will provide you with the following features:
- Marketing your property
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DISCLAIMER: Turbo Tenant, LLC does not provide legal advice. This material has been prepared for informational purposes only. All users are advised to check all applicable local, state and federal laws and consult legal counsel should questions arise.