Proper Handling of a Tenant’s Security Deposit

Security Deposit 101 for Landlords

When it’s time for your tenant to move out of a rental property, there are a few things to consider before returning the security deposit. Processes need to be in place to make the transition smooth and keep open lines of communication, so no issues arise.

Have Process and Procedures to Follow

One of the best ways to help with the move-out transition is to have a consistent and detailed process that the tenant can follow. These procedures will allow the tenant to vacate the rental property with ease and limited confusion. One of the best ways to help your tenant (and yourself) during the move-out process is to have documents that outline the obligations of the tenant, so everyone understands their responsibilities. For example:

  • Outline the timeline when vacating the home
    • When does the tenant have to give notification?
    • How long do they have to move out of the unit?
    • When does the final inspection happen?
    • When/How do they return the keys?
  • Define the terms for cleaning the home
    • Does the tenant need to professionally clean the home?
    • Does the tenant have to have the carpets professionally cleaned?
  • Explain what must be done to get the full security deposit back
    • Outline the maintenance that needs to be completed
    • Give suggestions on things that should be done
  • Have a move-out checklist ready so the tenant can use it as a guide
    • Make sure the checklist clearly defines what you will be looking for when it comes to the property

If you provide your tenant with all of these requirements, and they understand their responsibilities, there should be no concerns when it comes to returning a full or partial security deposit.

Want to learn more about “Move-Out” inspections and checklists? Take a look at the following blogs:

Return the security deposit

Once you have completed the final walkthrough/move-out inspection, make sure to return the security deposit promptly. Ideally, the security deposit should be returned shortly after the move-out inspection, but there is a period (typically within 14-30 days) where you can return the funds. In the State of North Carolina, a security deposit must be returned 30 days after the termination and delivery of the unit to the landlord.

Permitted use of the deposit (as defined by North Carolina)

There are several reasons admissible by the state of NC for not returning the security deposit or parts of the money to the tenant. Take a look at some of the reasons you are allowed to keep a tenant’s security deposit money:

  • Deduction for damages is one reason to keep all of or parts of a security deposit. While you can deduct for damage done to your unit/property, you must have proof and solid grounds for doing so. Make sure to have the proper documentation detailing any deductions and the reason for doing so. Please note, it is not best practice to make a deduction for general wear and tear of the rental property.
  • Damages to smoke alarms and carbon monoxide alarms
  • Deduction for unpaid rent: A landlord can use the security deposit towards the nonpayment of rent.
  • Deduction for unpaid utility bills such as water, sewer, and electricity
  • Breach of the lease- The cost of re-renting the unit after a breach by a tenant
  • Cost of removing tenant’s possessions left behind- removal and storage of tenant’s property after an eviction
  • Court costs

Not sure you want to deal with the move-out process?

At Oak City Properties, we make sure to work with you each step of the way when renting out your property. Our full management property service does everything from marketing the property to dealing with 24/7 maintenance concerns. At Oak City Properties, we also help with the “move-in” and “move-out” process. If you are interested in learning more, give us a call at (919)-232-9222 or check out our website: https://oakcityproperties.com