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What To Do if the Deposit Doesn’t Cover the Damage or Unpaid Rent

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Most landlords collect a security deposit from tenants when a lease is signed that is equal to one month’s rent to cover any damages or unpaid rent. While collecting a security deposit was the smart thing to do, it doesn’t always cover the total amount of damages or unpaid rent. If you find yourself in this situation, there are a few things you can do.

1. Communicate with the Tenant

When a tenant is moving out and you make the decision to withhold the security deposit from them, you must provide a letter stating how much of the security deposit you are withholding and why. The best way to go about this is to itemize the security deposit deductions for both damages and cleaning fees.

If the deductions are larger than the security deposit and the tenant still owes you money, you will need to send a demand letter for the remaining amount.

2. Send a Demand Letter

If the damages and unpaid rent are more than the security deposit, you will also need to send a demand letter for the remaining amount of money owed by the tenant. The demand letter should include the full itemization of damages, cleaning fees, and unpaid rent as well as the amount you are asking for and the date it must be paid by.

In your demand letter, be as specific as possible and include a phone number for the tenant to easily communicate with you regarding payment and any concerns they might have.

3. Consider Small Claims Court

If the demand letter is ignored by the tenant, it might be time to consider small claims court. While small claims court sounds like the best option, there are some downsides. Always consider the amount of money that is owed to you and the pros and cons before proceeding.

Small Claims Court is Time Consuming – If you decide to go to small claims court over the money that a tenant owes you, you will have to prepare your case, organize the evidence you have, research the small claims court process, and attend a court hearing in the town that your rental property is located in. There is also a filing fee associated with filing a case with small claims court that will have to be paid whether or not you win the case.

Your Tenant Might Not Have the Funds to Pay – If you win a case in small claims court, you still need to collect the money. If the tenant doesn’t have the funds to pay you, you won’t collect the money or will have to wait until the funds are available to collect.

Lack of Evidence – Evidence is everything in small claims court. If you don’t have proper documentation on how the property looked after the tenant moved out and the costs associated with repairing and cleaning the property, and even the rent amount owed by the tenant, your small claims court case can suffer.

Potential for Countersuit by the Tenant – There is always a chance that the tenant can countersuit you, even if you have done everything by the book. When taking a case to small claims court, always keep this in mind.

4. Conduct Regular Inspections

By conducting regular inspections of your rental property, you are able to monitor the condition and treatment of the rental unit more closely. Your tenants privacy is important, so while these regular inspections help avoid major damage, it’s important to only do them a few times a year so you don’t lose the trust of your tenant.

If you’re planning on conducting regular inspections, have this information stated in the lease terms and always give the tenants a few days notice before completing the inspection.

Some things to look forward during these inspections:

  • Pet stains
  • Odors
  • Wall damage
  • Working appliances

5. Walk Throughs Prior to Move Out

Prior to the tenant moving out, do a walk through of the rental unit. Use this time as an opportunity to take note of any damages that will need to be taken out of the security deposit. You can also provide the tenant with this list of damages that will need to be fixed to give them the opportunity to fix them prior to moving out.

The Importance of Properly Screening Tenants

To avoid problems with extensive damages and unpaid rent, it’s important to properly screen potential tenants before they sign a lease and move in. While no tenant/landlord relationship is perfect, the screening process will help eliminate any potential issues.

At Lamacchia Property Management, our team is able to provide landlords and property owners with several services to make the renting process easier including security deposit management, procurement of rentals, repair services and more. To learn more, contact us today at 855-213-3410.