One of the most difficult tasks for a property manager and/or property owner, can be refunding the tenant's security deposit to everyone's satisfaction. Any property management company (or property owner) is elated when they can issue a full refund because the tenant has left the property in excellent condition, complied with their rental agreement, and paid their rent in full. This is especially true in the San Diego rental market where tenants often move around fairly frequently.
Unfortunately, as a property owner there are times when deductions must be made for loss of rent and damages, leading to the dissatisfaction of departing tenants. However, steps can be taken to optimize a successful reconciliation between all parties involved. Whether you rent out a single-family home or a multi-family property, these steps can help you ensure a smooth process regarding a security deposit.
Step 1 - Start Preparting Your Residential Property Before the Tenants Move In
This may sound like an odd approach to take but common sense steps in the beginning will increase the odds for success when tenants move out of the property. As a rental property owner, it's important to consider the steps it takes to ensure success.
- First, prepare the single unit in a multi-family property or a full single family home, to a clean reasonable condition for when the new tenants move in. It is really difficult to charge for painting when the walls were scarred and marked when the first tenant moved in. If the property is in good condition, then it is reasonable to expect the same condition when the tenant moves out. It's important to document your maintenance on your investment property, which can be much more appealing to future tenants.
- As an investment property owner, it's important to document the rental property's condition before the tenant moves in. With this completed at the beginning of the tenancy, there are grounds for deductions if there are any damages at the end of the leasing period. If your rental property is spotless upon move in, it's much easier to check for damages when your resident moves out. It may not always be possible to avoid litigation so it is very important to have complete records to defend keeping any or all of the security deposit monies. One of the services that PropertyADVANTAGE provides is maintaining records for instances such as security deposits. If you're looking to invest more into your real estate property, PropertyADVANTAGE also provides asset management for those who are interested in maximizing their real estate income.
- As your property management firm, we conduct a thorough tenant screening. Starting with the right tenants in the beginning eliminates most problems regarding a security deposit refund at the end of the tenancy. A good tenant will care for the property while renting, complete all required payments, and leave the residence in good condition. Good tenants want to maintain a good rental history and credit; in addition, they want their security deposit back.
- As your San Diego property management company, we complete a detailed rental agreement that complies with state laws and executed to ensure that the tenants fully understands and signs what is expected of them during tenancy and upon move out. Proper documentation details what rent is due until the end of the tenancy, when rent is to be paid, and what condition is expected of the property when they move out. The rental agreement also clearly states the amount of the security deposit paid by the tenant.
Step 2 - Continue Important Residential Property Management Functions during the tenancy
This can avoid legal issues where the tenants feel they have the right to use the security deposit for rent or repairs while they are still renting out your investment property.
- Complete necessary repairs in a timely manner.
- Maintain accurate maintenance records.
- Keep accurate financial records on rent, late fees, and any other funds collected from the tenant.
It is our job as a full-service property management company to provide our clients with the highest quality of customer service available.
Step 3 - Complete the move out and refund of the deposit in a timely manner
It is important to remember that settling the security deposit in a timely manner will be to the benefit of all parties involved in the rental agreement.
- The residential property condition is properly documented and completed with the tenant whenever possible.
- A refund and/or statement of condition detailing the deductions is issued in accordance with state laws.
- If circumstances dictate that the security deposit has been forfeited, as your property management company we itemize repairs and details of all unpaid monies and issue a statement to the tenant at the last known address. This needs to be completed even if the tenant owes the property owner money.
- Failure to issue a security deposit statement and/or fund within the timeline of state law can lead to larger financial loss.
Step 4 - Use common sense if there is any dispute regarding the security deposit
- If the tenant challenges the deductions, it is important to evaluate if it is worth the dispute. Sometimes, even a small compromise will settle the matter. Remember that a legal action can be more costly than simply refunding the amount challenged.
- Most tenants do not dispute the loss of their security deposit when they owe more than they paid.
- It's our responsibility as a full-service property management company to consult an experienced attorney, and discuss your options with you based on their advice when necessary.
Handling a security deposit is not always easy. By taking the right steps from the very beginning of the tenancy until the end, can make the process as simple as possible.
If you're considering hiring a property management company for your real estate investment, PropertyADVANTAGE can help you with all of your leasing needs. If you're interested in learning more, check out our property owner services and resources!