The Property Management Shop

A Fair Approach to Security Deposits

by Marc Wilson

Q. I am having a problem with an ex-tenant over his security deposit. First, he demanded that we have a meeting at the unit to go over any potential problems. I told him I did not have the time. Am I obligated to meet with a tenant to discuss the disposition of his security deposit? After he left, I had to patch and paint some nail holes and fix some deep scratches in the hardwood floors. I deducted $400 from his security deposit and now he is threatening to take me to small claims court, the Rent Board, the Human Rights Commission and whoever else will listen. What should I do?

A. First things first—at the inception of the tenancy, all new tenants should receive and sign the standard Move In/Move Out Form. This document is available from the SFAA and will prevent this type of disagreement in the future. It gives the tenant the opportunity to document any and all preexisting conditions (i.e., scratched floors, broken windows, nail holes, and the like) that might have a material effect on the ultimate disposition of the tenant’s security deposit. When you meet with the tenant to sign this document and the associated rental agreement, the tenant might have reservations about signing the Move In/Move Out Form without thoroughly inspecting the unit.

As a matter of practice, I deliver my vacant units in perfect condition, so the Move In/Move Out Form is blank. By signing the blank form, the tenant is acknowledging that the entire unit is in perfect condition. If the tenant has reservations, I tell them to sign the form and then fax me an amended form within 10 days after taking possession of the apartment. Only 10 percent of my tenants fax me the amended form, which I then place in their file.

When you receive a notice to vacate from your tenant, mail them an acknowledgment that includes a copy of the original Move In/Move Out Form. This will serve as a not too subtle reminder of your expectations in regard to the condition of the unit. Your acknowledgment letter should clearly indicate when you will take possession of the apartment, what the tenant is expected to do with the keys, what condition you expect the apartment to be in, a request for the tenant’s forwarding address, when you will return their security deposit, and a reminder that he/she should not abandon any personal property in or around the garbage area or any other common area of the rental unit. You should also explain that it would be very, very expensive for you to remove any of their abandoned personal property from the building. We all know how frustrating it can be to find couches, lamps, boxes, kitchen supplies, and a bed in or around the garbage area after a tenant vacates.

You presently have no moral, legal or contractual obligation to actually meet with a vacating tenant to discuss the disposition of their security deposit. When a tenant asks, I tell him/her that I deal with eight vacating tenants a month—that is at least eight one-hour meetings per month, which is equivalent to an entire work day. Why should I meet with a tenant to show them nail holes in their walls, scratches in the hard wood floors, a dirty oven and possibly a bathroom that has been painted black? These people are adults, so why should I treat them like my six-year-old kid? Clean up your room! Paint that bathroom! It’s demeaning.

One of our Assembly members is actually advocating some legislation that will mandate property owners schedule personal meetings with vacating tenants to inspect the apartment. I can only assume that there are numerous ex-tenants complaining about the disposition of their security deposits and associated costs levied by the owner. I don’t see how “mandated meetings” are going to fix this problem. I don’t mind meeting with a vacating tenant if she/he is willing to pay for my time; heck, I’ll wash her car for $300 an hour. I think we have enough laws on the books. If a tenant thinks that I have withheld too much money, she/he can take me to small claims court or hire an attorney. Why do I have to meet with the tenant? All the tenant has to do is consult his Move In/Move Out Form to know what he/she needs to do to get all of his/her security deposit back.

I try to err on the side of the tenant when it comes to security deposit dispositions. I usually charge the tenant only for the truly egregious damage, always providing the tenant with actual bills and receipts. To a large extent, as owners and managers, we have complete control over the security deposit. What is the tenant’s recourse realistically—a small claims court beef? How many tenants will take a day off from work to haggle over three or four hundred dollars? With complete control comes responsibility. You should always handle your security deposit dispositions just as you would want them handled if you were the tenant. Don’t take advantage of someone who has no real recourse—be fair. If you only rent apartments that are in perfect condition to good tenants and practice the aforementioned policies, you should have very few security deposit hassles.

The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of the SFAA or the SF Apartment Magazine. Marc Wilson has been managing and selling San Francisco apartment buildings for over 15 years. Please send your questions concerning property management issues to Marc Wilson at 1699 Van Ness Avenue, SF, CA 94109. He can be reached at 415-229-1275. © Copyright 2002.