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Protecting Yourself Against a Security Deposit Lawsuit

Whenever a landlord does not give back all or some of a security deposit they put themselves at risk for a lawsuit over the funds. Even if the landlord or property manager is 100% justified in keeping part or all of the security deposit, it may not stop a tenant from filing a small claims court lawsuit. Therefore, it is essential that landlords and property managers take the proper steps to protect themselves against a security deposit lawsuit.

Since each state has different rules on security deposit limits and deadlines, it is important that you look up the rules specific to your state. Below we will discuss some steps New York landlords can take to protect themselves against tenant security deposit lawsuits. Since New York has one of the most stringent rules when it comes to security deposits, even if you do not live in New York following these guidelines may protect you against a lawsuit. For more details see Nolo.

  • Give Tenants a Move out Letter: To avoid any confusion when tenants are prepared to move out give tenants a templated letter that you can have easily saved in your property management system that includes how you expect the unit to be left (e.g. no garbage or items left in the unit), your final inspection procedure, the type of deductions you're allowed to take from their security deposit and when and how you will give back their security deposit.

  • Inspect the Unit with the tenant if possible: Inspecting the unit with the tenant may decrease the chance of a dispute especially if you are following a standard move out checklist. Make sure to take pictures of any damage.

  • Prepare an itemized deduction statement and send it to the tenant: Once the tenant has moved out you can provide them with receipts or reasonable quotes on items you had to deduct from their security deposit like damage to the rental unit or overdue back rent.

  • Give back whatever security deposit is left over after legal deductions within the proper time frame.

If you have followed the steps above within the legal time frame, usually 21-45 days after the tenant moved out, the tenant is less likely to sue you because you have been very open and diligent about the actions you took and why you took them, and if they do sue you, you will be protected and likely win.

This post is provided by RISSOFT Residential and Commercial Property Management Software, specializing in innovative and cutting-edge property management software for all 50 states. Request a demo or contact us today to receive more information.

Disclaimer: The information provided in this post not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting local, state, federal or provincial tenancy laws.


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