Charlotte Property Management Monthly: Don’t Return Your Tenant’s Security Deposit Just Yet

As a Charlotte property manager, I am a big proponent of returning as much of the tenant’s security deposit to them as possible.  If the tenant took time to care for the property, did what they were supposed to do during their lease period, and paid all of their rent, they certainly deserve it back!  There is a reason property managers are required to put the security deposit into an escrow account; it is a reminder that the security deposit is not the landlord’s money, it belongs to the tenants.

However, that being said, I’m also a proponent of the “slow return.”  By NC law, the security deposit does not need to be returned to the tenant for 30 days.  And also according to the law, if the landlord is still figuring out repair costs and won’t make the 30-day deadline, they just need to notify the tenant that the payment will be delayed in writing and let them know the approximate cost of the repairs at that point in time.

Why would landlords delay the tenant’s security deposit return?  The most popular question asked (by far) when a tenant moves out is, “when can I expect the security deposit back?”  If you want to be a “cool” landlord, shouldn’t you just give it back after the walk-through?  You already know how much the repairs are going to cost (if there are any) and the tenant could use the money back.  You certainly want to be good to the tenants who were good to you, right?

Well, yes, but not exactly.  I recommend keeping the security deposit as long as possible.  Once it is given back, you really need to consider the tenant gone and their account closed.  You need to assume that you will never get any money from them again.

So?  They moved out already, right?

Yes, but…  Walk-throughs are an inexact science and sometimes things are missed.  Think about home inspectors; they are professionals that take hours doing a walk-through to write a comprehensive damage report and they still miss issues with the home.  I guarantee that landlords are not close to conducting several hour walk-throughs at the level of detail that they are (nor should they be).  Things get missed and that’s life.

However, you can provide yourself some extra time so missed things can get caught before it’s too late and you have to pay for it!  It may be one of the handymen working on your home that alerts you to new repair issues.  It may be a Realtor or marketing person who wonders why something looks off.  Or (usually) it’s the next tenant who moves in afterwards that lets you know what’s not up to par (and by the way, they want the issues fixed on your dime!).

Let tenants pay for damages they are responsible for.  And, unfortunately, the delay in returning the security deposit to them is a good way to ensure this happens.

Brett Furniss is the President & Owner of BDF Realty (Charlotte Property Management) which works with Charlotte real estate investors and homeowners and Rent-To-Sell Realty (“When You Need a New Solution to Sell Your Home”) which  specialize in rent-to-own (lease options) and rent-to-sell homes.  His newest book, A Real Estate Agent’s Complete Guide to Representing Rent-To-Own (Lease Option) Tenants (Delight Clients, Fill Vacant Homes, and Earn $2,250* Upfront! (*Minimum!)