Let's paint a picture: the most squared-away power couple you've ever met has just signed your lease agreement and moved into your rental unit. You were so eager to have such great tenants that you felt you could forego the security deposit. Now it's four months in, they're constantly behind on rent, and they've destroyed your wooden floors.
Sadly, even the tenants you'd never expect can give you grief as a landlord. That's why you should always collect a security deposit and manage it well. Learn how to manage the security deposits you collect in this brief guide.
Security Deposit Limit
Landlords typically use a security deposit to ensure tenants adhere to the terms in their agreement (rent and conduct clauses). Washington State law limits the security deposit you can charge to one month's rent.
Nonrefundable fees and pet fees don't fall into the definition of security deposits. You can collect such fees on top of the security deposit, and there's no limit to what types of fees you can charge.
However, each of these extra fees and its purpose must be stated explicitly in the lease agreement. Landlords can't suddenly declare a hidden fee as grounds for withholding part of the deposit. It would be best to remember that tacking on a bunch of extras could make your rental unit less competitive in Tacoma's market.
Procedure and Tips for Managing Security Deposits
There are extra steps a landlord must take for the security deposit to do what it's meant to do legally. The primary step is a thorough property inspection (with thorough documentation) before the tenants move in.
If you don't, you lose the ability to make deductions from the deposit for repairs. This is one of the new tenant protection laws to prevent landlords from unfairly withholding deposits.
When tenants give notice of leave, then you must do an outgoing inspection. Comparing the unit's condition before and after the tenancy will show whether you need to make any deductible repairs.
You're only allowed to withhold the deposit for actual property damage. This includes horribly stained carpets, torn curtains, and broken appliances. You aren't allowed to deduct for repairs for "ordinary wear and tear" that may occur in everyday use.
You must provide an itemized list of deductions with supporting evidence if you deduct from the deposit. Landlords have 21 days to refund their tenants in part or in full. If the repairs cost more, then those damages can be claimed in a lawsuit.
Trust Account
Washington security deposit laws require that you keep the money in a trust account with a bank in Washington State. The tenants get the name and account number for the account, but you get to keep the interest!
Manage Deposits Like a Professional
Security deposits are great tools for protecting investment properties, but in Washington, they come with a lot of rules. There's a limit to the amount you can collect as a deposit and a detailed procedure for managing it. Luckily, the laws are easy to follow.
At PMI South Sound, our company is built on 20 years of real estate experience. We know how to make the complicated procedure behind a security deposit seem effortless. Contact us today if you want to learn how, or let our property management team do it for you.
