Landlords are allowed to collect security deposits from tenants. The maximum amount of security deposit you can charge depends on where you are located. In California, you can charge up to a maximum limit equivalent to two months’ rent.
Security deposits are often used to cover damages that are not part of normal wear and tear. Sometimes, they are also used to cover unpaid rent and other charges that tenants failed to pay. Under California law, landlords are allowed to deduct the following costs:
- Unpaid rent
- Cleaning costs to bring the property back to its original condition at the beginning of the tenancy
- Damage that is beyond normal wear and tear
- Restorations indicated in the lease agreement
In California, there is no limit on how much you are allowed to charge a tenant for the damages. However, the cost must be reasonable and commensurate to the extent of the damage.
In some cases, however, the cost of unpaid rent and damages exceeds the amount of the security deposit. If this happens, you are entitled to collect the remaining balance from the tenant. There are a few things that you can do to handle this kind of situation, such as:
1. Communicate With the Tenant
In California, you are required to return the security deposit within 21 days from the time the tenant moved out. Should you decide to withhold the security deposit from the tenant, you need to send a letter stating how much you need to deduct from it.
You also need to provide an itemized list of deductions for damages, cleaning fees, and unpaid charges. If the total amount of charges is larger than the security deposit and the tenant owes you money, you need to indicate this in your letter as well. Include how much the tenant owes and for what particular charges. You may also need to send a demand letter to collect the remaining balance.
2. Send a Demand Letter
In some cases, the total costs of damages, cleaning fees, and unpaid rent exceed the amount of the security deposit. If you encounter this situation, make sure to send a demand letter to the tenants indicating that they still owe you money. Be sure to include the full list of itemized charges, such as the cost and nature of damages, unpaid rent, cleaning fees, and other restoration costs.
Don’t forget to state the total amount of the remaining balance owed and the date that it should be paid. Be specific when stating the due date to avoid any confusion. Also, provide payment methods to your tenants and include your contact information in case they need to communicate with you to make arrangements for the payment.
3. Consider Filing a Case in the Small Claims Court
If the tenant refuses to pay what they owe and your demand letter is ignored, it’s time to consider filing a case against them in the small claims court. In California, the small claims court will hear rent-related complaints involving monetary amounts of up to $10,000.
Before proceeding with filing a complaint, make sure to consider the amount of money involved and decide whether or not it is a wise idea to go through the legal process of filing a case. While filing a case in the small claims court can seem like the best option to consider, it also has its drawbacks. Keep in mind that:
- The legal process can be time-consuming: If you decide to go to a small claims court, you have to prepare all the documents and evidence that can help you with your case. You also have to understand the process and attend hearings. What’s more, there is a filing fee that you need to pay regardless if you win the case or not.
- The tenant can file a countersuit: Even if you have done everything right, there’s still a possibility that your tenant will file a countersuit against you. This can make the process even longer and more stressful.
- Your tenant may not have funds to pay: Even if you win the case in the small claims court, there is a possibility that the tenant may not have enough funds to pay you. In this case, you still need to wait until the funds are available so you can collect what the tenant owes you.
4. Conduct Regular Inspection
To avoid costly damages, conducting regular inspections is a must. Doing this can help you determine the state of the property and identify the damages that are not part of normal wear and tear. By discovering these damages, you can require the tenants to have them fixed right away.
During inspections, check for stains, damages on the furniture and appliances, odors, and damages on other parts of the property. The earlier you discover damages, the less costly it would be to fix them.
5. Perform Walkthrough Inspections
Before the end of the lease, it’s best to conduct a walkthrough inspection to check the condition of the property. This must be done before the tenants move out. You can take note of the possible damages so that you can give tenants a chance to get them fixed before they move out. You can also give them an initial estimate for the repairs so they will have an idea of how much they need to spend in case the cost is higher than the security deposit.
6. Work With a Property Manager
Working with a professional property manager can help avoid this problem altogether. A property manager can ensure that the rental remains in its best condition and that tenants are up-to-date with their rent payments throughout the tenancy. Any property damage and late payments are addressed as soon as possible before they blow out of proportion.
There are several options available to landlords in the event that the security deposit doesn’t cover the cost of unpaid rent. If you’d like help managing your rentals contact Home Choice Property Management today!