Deposit Does Not Cover the Unpaid Rent or Damage?
Deposit Does Not Cover the Unpaid Rent or Damage?
Collecting a security deposit from your tenant is a commendable action.
However, the deposit may not cover the damages or unpaid rent left behind by the renter.
So, what would you do in this situation?
Majority of landlords collect a deposit that is worth one month’s rent at the time of moving in.
This deposit is to cover any unpaid rent or damages when the tenant is moving out.
Nevertheless, the tenant might owe more than the deposit at the move-out time.
Or there might be damages that exceed the deposit. Unfortunately, you lose money.
How do you handle this situation? Here are the things you should do:
1. Inform your tenant
Before withholding the deposit legally, you need to send a letter to the renter.
The letter should explain the reasons for withholding the deposit.
This must be done within the stipulated timeframe.
You should document and itemize everything you want to deduce from the deposit.
Use this same document or another one to inform the tenant about withholding all or some of the deposit.
If the tenant still owes you, send a demand letter to them stating how much they owe.
2. Send a demand letter to the tenant
Furthermore, send a demand letter with the details of how much they owe you.
Check out this sample of a demand letter:
Sample of a demand letter
[Date] [Name of tenant] [Address of tenant]
Re: Return of the security deposit
Dear [Name of tenant]
This is to inform you about your security deposit in the amount of [state the amount]. This deposit is for property located at [state address] during lease term of [start and end dates].
You will not get your security deposit for this property. I will keep it to cover:[Itemize the damages or rent]
The damages cost [amount of damages].
Since the cost of damages is more than the security deposit, you owe me [amount owed]. This amount represents total damages minus the deposit. You should pay me immediately.
Please, make the payment to:[Your name and address]
Sincerely,[Your name] [Your signature]
3. Determine if you want to go to small claims court
Sometimes, your ex-tenant might send you the money owed after getting the letter.
However, they might not do so in some cases.
If so, send another demand letter and attach the first one to it.
Nevertheless, the ex-tenant might still not pay you.
At this point, decide whether you want to go to small claims court or not.
Advantages of going to small claims court
Generally, you are likely to get a favourable judgement.
In other words, they will ask the tenant to pay the money owed.
Also, you will get the satisfaction that the ex-tenant did not run away with your money.
Disadvantages of going to small claims court
- It takes time
Foremost, you must prepare your case.
Then, organize the evidence and understand what it takes to go to small claims court.
Afterward, you need to attend the hearing in any small claims court where the rental property is situated.
In general, these processes can be time-consuming.
- Your ex-renter might not have the money
After winning the judgment, getting the money owned might be another problem.
If the tenant is broke or jobless, you might still not get the money.
- There might be no evidence
It might be difficult to prove your case.
This is especially true f you didn’t have pictures of how your property looked at move-in period.
Resultantly, winning the case in small claims court might be an issue.
- You might lose money
To prepare your case, you need to pay filing fees.
The fees should be below $100. You will get your filing fees back if the judgment favours you.
However, if you lose the case, you will also lose the fees.
Also, it may be important for you to take the day off from work.
Therefore, you should also consider this before going to small claims court.
- Your renter might file a countersuit
Irrespective of having a substantial case against you or not, the renter might file a countersuit.
If you did not abide by regulation in the lease term, you might have to pay the tenant.
When you should go to small court claims
However, if you don’t mind all these disadvantages, you should go to small claims court if:
- The ex-tenant owes you lots of money
- There are pieces of evidence of the money owed
- The ex-tenant is not broke, works or has a source of income
- You can afford the time and effort required to go to small claims court
Nevertheless, if you are not convinced it is worth it, forgo the money owed.
How to prevent excessive damages in your property
Now, you know the steps to take when your tenant owes you money.
However, it is more important to know how to prevent it from happening at all.
Here are the three things you can do to prevent such a situation:
- Ensure proper and regular inspections
Regular inspections can help you prevent excessive damages.
Nevertheless, you must avoid intruding on the privacy of your renters.
An annual inspection may be good enough to prevent excessive damages.
Alternatively, you can conduct the inspections two or more times each year.
If there is any breach of terms or problems, address the situation immediately.
This prevents small problems from becoming bigger ones.
- Conduct a walk-through a month before the tenant moves out
Make sure that you have a walk-through before or when the tenant leaves.
However, you can also conduct the walk-through immediately after moving out.
The benefit of the walk-through is to note any issues.
You can easily and quickly rectify them on time.
Also, this can help you use the deposit to fix the problems.
- Screen your potential renters
Proper screening of your potential renters is another way to prevent losing money.
Primarily, good tenants are likely not going to owe you any rents.
Also, it is unlikely that they will damage your property.
However, screening does not eradicate the possibility of a bad landlord-tenant relationship.
But it can be very helpful in most cases.
Check the background of all applicants.
Similarly, check their credit and contact their previous landlords.
Are you in need of assistance regarding landlord-tenant relationship?
Whatever the case is, contact us at Reneza.
We offer all-round solutions to all real estate related issues.