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What to do if the Deposit Doesn’t Cover Unpaid Rent

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It’s a completely normal practice for landlords to collect a security deposit from new renters during the lease signing. But the value of the deposit can depend on what the state laws dictate. Typically, it’s equivalent to a single month’s rent. This deposit is to pay for any possible property damage or unpaid rent from a tenant.

Even though collecting a security deposit safeguards a property owner from some bad situations, the amount may be inadequate. Should this situation ever happen to you, we at Realty Management Associates have put together this guide:

Talk to the Tenant

When the tenancy period ends and the renters leave, you may need to inform them that the security deposit won’t be refunded. Even if you have a great relationship with the tenant, It’s best to give a letter that will detail the amount of the security deposit you’re withholding and the reasons behind the action.

You can start by itemizing each security deposit deduction under property damages and cleaning fees for more clarity. Should the deductions turn out bigger than the security deposit such that the tenant needs to cover the money, it’s recommended to give them a demand letter stating the remaining amount owed.

talking to tenant

Send a Demand Letter

If the damage repair fees and unpaid rent dues are higher than the security deposit amount, it’s imperative to send a demand letter to the renter. The letter will inform them of the additional money they need to pay you.

It’s better to itemize and provide the details on repair charges, cleaning fees, and unpaid rent in the demand letter. This includes the total amount they owe and when it should be paid. Being specific and including contact information ensures that the tenant can easily reach you for payment, questions, and concerns.

Consider A Small Claims Court

There are cases when a tenant does not pay attention to receiving a demand letter. When this happens, you can decide to go to the small claims court. This route may appear the best solution to your dilemma but it does have its drawbacks.

Check the amount of money that a renter owes and look at the advantages and disadvantages of the situation before proceeding to handle it through the small claims court.

But there are a few reasons not to pursue the issue in court:

It Takes Considerable Time

Resolving the matter by heading to a small claims court to collect the money owed by the tenant requires considerable time and effort. You need to gather and organize your documents and evidence and prepare to present your case.

You’d also need to pay a filing fee at the small claims court. This is required even if you lose the case.

The Tenant is not able to Pay

Winning the case at a small claims court is the easy part. The hard part is getting the tenants to pay when they don’t have the money. At best, you will need to patiently wait until the funds are available for collection.

small claims court

The Proof Is Not Available

At the small claims court, it’s crucial to have on-hand evidence. If you lack the documents to prove your cases, such as pictures of the damage or repair receipts, then you may not be able to win your case.

The Possibility of Being Countersued

Remember that the tenant also has the option to file a countersuit. Though all your documents are in order and you haven’t failed in your landlord obligations, you can’t expect that the tenants won’t defend themselves.

Conduct Regular Inspections

Make it routine for you to perform rental property inspections. This way, you can closely track your unit’s condition and observe how the renters are treating your property. This doesn’t mean not honoring the privacy of your tenants though.

Schedule your property inspections in reasonable time periods. This way, you can still notice major damages while continuing to respect the tenant’s right to quiet enjoyment and privacy. Otherwise, the renters can feel disturbed and you want to avoid that.

Make sure to outline the regular inspection timetable in the lease so the renters will be properly informed and know what to expect.

Before you start a property inspection, it’s a good idea to provide advanced notice so the tenants can have time to rearrange their schedule if they want to be present for it or not. Things to observe when performing property inspections:

  • Pet stains
  • Odors
  • Damage on walls
  • Working appliances
  • Mold

Perform Property Inspections Before a Tenant Moves Out

Prior to a tenant leaving, go on a walkthrough of your rental home. This is a good opportunity to check on the damages and estimate the repair charges to be subtracted from the security deposit in your keeping. 

A good option is to furnish your renters with the list of property damages that need to be addressed so they have the option to have it repaired before stepping out of your rental place.

property inspections

Why It’s Important to Screen Tenants

Prevention is always better than treatment. Rather than fixing property damages and dealing with unpaid rent issues, it’s good practice to adopt a proper screening process to filter quality tenants from others before welcoming them into your rental space.

Effective tenant screening can reduce a lot of possible problems in the long run and minimize draining conflicts. It’s more important than to work out an organized and proper tenant screening procedure.

Bottom Line

Get in touch with Realty Management Associates, Inc. today if you’re looking for a trusted manager offering a full range of property management services.

We can assist in finding great tenants for your vacant unit, proper handling of the security deposits, running a complete tenant screening, and dealing with property maintenance and repair, among others.