6 Ways to Avoid Losing Your Security Deposit

US News

The housing crisis caused many consumers to rethink their definition of the American Dream. According to a report released by the MacArthur Foundation earlier this year, 45 percent of homeowners say they would consider renting at some point in the future, citing benefits like increased mobility and less maintenance.

Whether a former homeowner returning to the rental market or a lifelong renter, tenants are often required to pay a security deposit to cover potential damages. In some states, the landlord must keep these funds in a separate, interest-earning account and pay the interest to the tenant.

However, a nationwide survey of 1,000 renters by Rent.com earlier this year found that 26 percent of renters have lost their security deposit at some point. Of those, 36 percent said their landlord offered no explanation about not returning the deposit, which may violate tenants' rights in some states.

Here's six ways to ensure you get your deposit back.

1. Document the property's condition. Many disputes over security deposits occur because the landlord and tenant didn't document pre-existing damage such as stains on the carpet or holes in the walls, so note any damage before you move in. "Mom and pop landlords don't always have the rentals checklists that a well-managed apartment community is going to have," says Bill Deegan, CEO of RenterNation.com, a website that advocates for renters. "They do things informally, and there's a lot that falls by the wayside. That's why it's really important for the prospective resident to take the initiative and document things."

[Read: Tips for Renting Your First Apartment.]

Deegan suggests making sure all appliances work and taking photos of any stains or damage inside and out. If you're renting a single-family home, for instance, you won't want to be charged for a crumbling sidewalk or other exterior damage. He also suggests taking another set of photos after you move out in case the landlord doesn't assess the unit's condition right away. That way, he or she can't charge you for damage that may occur after you leave, Deegan says.

The landlord shouldn't withhold money for normal wear and tear, but if you damage the unit, you may be on the hook for repairs. What's the difference between normal wear and tear and actual damage? "If you have little kids and they're rubbing their hands on the wall, that's normal wear and tear," Deegan says. "If they're punching holes in the wall, that's a different story."

This can also depend on the length of your tenancy. A tenant who lives in an apartment for a few months shouldn't cause much wear, but a tenant who's lived in the unit for several years might be expected to make more of an impact on the apartment's condition, according to Kirk McGary, founder and CEO of Real Property Management, which manages rental properties in 45 states.

2. Discuss expectations with your landlord. Read your lease and make sure you understand your landlord's policies. McGary suggests asking questions like these: "Who's going to shovel the snow? What date is my rent due? Is there a grace period for late payments? Who pays utilities?" Also ask what happens if you need to move out early. "Typically the deposit would be applied to any outstanding monies due, including rent," McGary says. "Any leftover money would be returned to the tenant. However, leases can be written differently, and the lease would govern [that]."

If you're renting a single-family home, you may also be responsible for watering or mowing the lawn or shoveling the sidewalk, and the city or town may fine homeowners who fail to do so. Make sure you follow through on any shoveling or mowing you're expected to handle yourself.

As your move-out date approaches, Kari Taylor, Rent.com's director of rental insights, recommends having a conversation with your landlord to avoid surprises. Frame the conversation this way: "I really want to make sure I get my full security deposit back. Is it required that I caulk and paint, or is that something you require your maintenance team to do?"

[Read: How to Decorate an Apartment Without Forfeiting Your Security Deposit.]

3. Get written permission for any modifications. Renters don't have the freedom to customize their home the way an owner does. Before making modifications such as hanging a chandelier or affixing cupboard liners, run it by your landlord. "It's better to ask for permission than to beg to be forgiven," Taylor says. "You could lose your security deposit if you install your flat-screen TV on the wall or if you paint your walls and it's not an approved color."

You may think the new paint or lighting is an upgrade, but your landlord might want to keep the unit neutral to appeal to future tenants. Even if your lease doesn't have a clause forbidding customizations or if you get verbal permission to paint, Taylor suggests getting permission in writing to avoid potential disputes later on.

4. Clean the apartment before you move out. Some landlords or management companies vary in their definitions of clean. Many apartment managers ask for your residence to be "broom swept" before you leave, "which means basically clean the house like your parents are coming," Taylor says. "Leave it better than when you came."

Make sure you clean carpets and inside the refrigerator, as renters sometimes overlook those areas. Also be sure to remove any trash bags or belongings. "Sometimes tenants leave stuff behind, which some landlords don't like," Taylor says. "That puts someone else in the position of having to move it."

5. Mind your pets. Tenants with pets often pay a separate pet deposit to cover damage from a cat that may urinate on the carpet or a dog that scratches up the floor. Some of this behavior may be inevitable, and you might not get your money back if the damage requires costly repairs. McGary says in single-family homes, it's not uncommon for a dog to dig up the backyard or damage the sprinkler system. "When you start chewing up sprinkler systems or you have a pool or a hot tub, it costs real money to repair those," he says. "Cats urinate in carpets, and people don't realize that smell is extremely difficult to get out of the pads themselves. Usually you have to pull it up, seal it, clean it and that's expensive."

[Read: How Much Should You Pay for a Pet Deposit?]

6. Know tenants' rights in your state. Rules on tenants' rights and security deposits vary by state. In California, for instance, landlords can only use a security deposit to cover unpaid rent, clean the unit to resemble the condition when the tenant moved in, repair damages caused by the tenant or replace or restore any keys or furnishings. Under California law, landlords have 21 calendars days after the tenant moves out to fully refund the deposit or send an itemized statement explaining the reason for deductions. In most states, the timeline is 15 to 30 days from the time tenants surrender their keys, so drop off yours on time to avoid any delays.

If your landlord doesn't return your security deposit and fails to offer a good reason for withholding the money, find out what recourse your state offers, like small claims court. "Depending on whether it was a really big security deposit," Taylor says, "you would weigh that against the time and financial cost of taking that action."

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