Did you know there is more litigation surrounding the return of the security deposit than in any other area of property management?
How do you make sure you do not end up in court over a security deposit?
1. Perform a thorough move in inspection and have it signed by tenant & landlord
2. Understand what “normal wear & tear” mean
3. Perform a timely move out inspection and document
Perform a thorough move in inspection and have it signed by tenant & landlord
Most amateur landlords are so excited to finally get a tenant they will just do a perfunctory move in inspection. Do you walk through the home without a plan looking for major issues that may jump out at you? Doing a move in inspection in this manner guarantees that you will miss many items.
Complete a document and save it in Word, listing all items in each type of room that you want to inspect. Create two columns, one for the move in inspection and one for the move out inspection.
Add items depending on the room such as light fixtures, walls/ceilings, air vents, windows/screens, sinks, faucets, towel bar, cupboards, etc.
Do your move in inspection with this printed document on a clipboard document all items as either OK or damaged.
PowerHouse Property Management uses software designed especially for the iPad for this function. We also include photographs of all damaged items and have the tenant and property manager sign the document.
Understand what “Normal wear and tear” means
The term “Normal wear and tear” in the Georgia Landlord Tenant law is described in a vague way that could differ amongst individuals. A generally accepted definition of “normal wear and tear” is: “the inevitable physical decline of the condition of a property from time and usage”.
The biggest reason why landlords get into trouble is not looking at the age of the asset with damages in excess of normal wear and tear.
Let’s look at a carpet as an example. IRS guidelines state that new carpet has an average of seven years life for depreciation purposes.
If a tenant damages a brand new carpet that had recently been installed during their first year of tenancy the landlord could rightfully expect to deduct from the security deposit almost all of the cost to install new carpet. However if a tenant damages a similarly priced carpet that is five years old the damage amount will be considerably less.
Let’s look at the numbers. The landlord purchases new carpet for $1000 and places it in a rental home five years ago. The tenant moves out and damages it to the point that it will need to be replaced. The landlord should only be able to deduct about $285 from the security deposit. Average depreciation annually would be about $142 times two years remaining on the useful life of the carpet.
Perform a timely move out inspection
Georgia law states that a tenant must be notified within three days of any monies deducted from the security deposit. He then has an additional five days to dispute any charges. The landlord must return the security deposit back to the tenant within thirty days of the tenant moving out.
Use the inspection form that was used during the move in inspection, notating any damages and taking photographs of all damages and remember… only deduct for damages in excess of normal wear and tear and return the security deposit to the tenant within thirty days.