How to Manage Security Deposit Disputes
Security deposit disagreements are common in the landlord-tenant relationship. However, by hiring an experienced property manager, you can increase your chances of diffusing such disagreements before they develop into more serious disputes.
An ounce of prevention
Here are some ways you can prevent security deposit conflicts from arising:
- Document and share: It’s a good idea to create and share with all tenants a video and written log detailing the condition of the property before and after tenancy.
- Be specific about withholdings: Rigorously describe the exact amount and reason for withholding a security deposit. In Maryland, you have 45 days from the lease end date to explain all withholdings.
- Clearly itemize any withholdings: Do not be vague when itemizing withholdings. Describe every last detail, and break down the cost of services, so your tenants have a clear understanding of why their security deposit is being withheld.
- Allow for normal wear and tear: When preparing deductions, it’s important to consider typical wear and tear on the property. For example, carpets and appliances generally require replacement every 10 years. If new tenants move in after 5 years of use, and remain another 5 years, you should only withhold 50% of the cost of the flooring, new refrigerator, etc.
- Include and document any legally required interest: Maryland has a 1.5% interest rate for security deposits. Ensure this is clearly explained and presented to all tenants.
- Promptly notify tenants about withholdings: Notify and provide a letter regarding the withholding of any security deposit to all tenants within the state’s legal time period of 45 days.
- Send the withholding letter to the last known address: You are legally required to mail a letter of the holding letter to the last known address of tenants and you should also email a copy to all tenants named on the lease.
- Write “Settlement release of any claims” on the back of the refund check: Ensure security deposit checks are clearly identified.
- Write the check out to all those named on the lease: Avoid writing multiple checks to each name on the lease agreement. This can create confusion and lead to unnecessary arguments.
By following these tips, you can greatly reduce your chances of encountering contention when a security deposit disagreement arises. It is a good idea to hire a professional to help you manage your property. A seasoned property manager will already be familiar with these strategies and can be an invaluable ally no matter what type of tenant-related conflict you face
Resolving a security deposit dispute
When conflict is inevitable, you should proceed calmly, carefully, and legally. Remember, the goal here is resolve the dispute, not get into a battle of he-said/she-said. When settling a heated dispute, it’s always best to seek guidance from a property manager or attorney. But if you must resolve the disagreement on your own, follow these steps:
Ask for a written complaint: If one of your tenants wants to dispute withholdings, make sure they send you a written letter explaining the grievances.
- Acknowledge receipt of the complaint: As soon as you receive the written complaint from your tenant, notify them that you are aware of the situation and explain the next steps in the process along with any deadlines. Listen carefully to their story about what happened, take notes, and make sure you don’t make any decisions while on the phone with your tenants.
- Consider hiring a professional: Even relatively minor disagreements can turn sour. To protect yourself and your real estate, you should consult with a property manager and/or an attorney as soon as possible.
If you choose to hire an attorney or property manager:
- Follow their instructions.
- Emphasize that your focus is on resolving the dispute as swiftly and cost effectively as possible.
- Give them the power to resolve the issue with a financial limit in place.
In Maryland, security deposit disputes can quickly become messy legal battles. To help resolve disagreements as quickly and effectively as possible, it’s in your best interests to seek assistance from an experienced property manager.