Guide to Security Deposit Return Letters

A security deposit return letter is a crucial document for landlords and tenants alike. It specifies how much of a tenant’s security deposit will be returned, details any deductions, and provides contact information for further inquiries. Properly managing this process can help maintain a positive landlord-tenant relationship and ensure compliance with local laws.

This article will cover what to include in a security deposit return letter, considerations for landlords, permissible deductions from a security deposit, and offer a free template for your use.

When to Provide a Security Deposit Return Letter

A security deposit return letter should be provided whether you are returning the full deposit, retaining a portion, or using the entire amount for repairs. State and local ordinances often mandate how long landlords have to return a deposit and whether a return letter needs to be given within this specified timeframe. Read our state by state guide to security deposit laws to learn more.

Failing to return the security deposit or provide an explanation can lead to legal action by the tenant. A detailed security deposit return letter can reduce the likelihood of being sued, particularly if you can prove you notified the tenant within the required period.

Related: Security Deposit Receipts [+ Free Template]

What to Include in Your Security Deposit Return Letter

Every security deposit return letter should contain:

• Names of all tenants: Include all individuals who rented the property.
• Initial security deposit amount: State the original deposit amount.
• Rental property address: Specify the address of the rental property.
• Itemized list of deductions: Many states require an itemized list of expenses the deposit was used for. Note that normal wear and tear cannot be deducted from the deposit.
• Copies of repair and cleaning receipts: Although not mandatory, including these receipts can help tenants understand the deductions.
• Remaining balance: Clearly state the total deductions and any remaining balance to be returned to the tenant.

After finalizing your letter, you can send it via email or mail for the tenant to review.

Important: Landlords cannot use a tenant’s security deposit to repair normal wear and tear.

Allowable Deductions from the Security Deposit

Understanding what can and cannot be deducted from a security deposit is vital for landlords. Here are common reasons for deductions:

1. Unpaid Rent

If the tenant left without paying their rent, the landlord is entitled to deduct the outstanding amount from the security deposit.

2. Damages Beyond Normal Wear and Tear

Normal wear and tear includes minor issues like small nail holes in the walls or slight carpet wear. However, damages beyond this, such as large holes in walls, broken windows, or significant carpet stains, can be deducted from the security deposit.

3. Cleaning Costs

If the tenant left the property excessively dirty, the landlord can deduct cleaning costs from the deposit. This does not include standard cleaning but situations where the property requires extensive cleaning beyond normal use.

4. Unreturned Keys or Garage Door Openers

If the tenant fails to return the rental keys or garage door openers, the cost to replace these items can be deducted from the deposit.

5. Removal of Tenant’s Personal Property

If the tenant leaves behind personal belongings, the cost of removing and storing these items can be deducted from the security deposit.

Related: What Can Landlords Deduct From The Security Deposit?

When Should You Return Security Deposit Interest?

In some states, landlords must keep security deposits in an interest-bearing account and return the accrued interest along with the deposit. Typically, the interest should be returned with the deposit, but this can vary by location.

For information on which states require landlords to pay interest on security deposits visit our state by state guide to security deposit laws.

What If My Tenant Didn’t Provide a Forwarding Address?

Request a forwarding address from tenants when they decide not to renew the lease. If they haven’t provided one, you can mail the security deposit to their last known address (your rental property) or contact them for their current address.

Sending the letter via email as well can provide both physical and electronic records of the correspondence.

Manage Security Deposits with Landlord Studio

Handling security deposits can be complex, but Landlord Studio simplifies the process for both landlords and tenants. With Landlord Studio, you can easily collect payments online, including security deposits, rent payments, and tenant payable expenses. Every payment collected through the platform is automatically recorded, ensuring accurate and organized financial records. Additionally, you can add notes to each deposit payment, detailing where the security deposit is stored, the date it was received, and the deadline for returning it to tenants.

Create your free account today and discover how Landlord Studio can streamline rent collection and security deposit management.

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