What To Do If Your Tenants Security Deposit Doesn't Cover Damage to Your Rental

By Brittany Loeffler on August 26, 2020

One of the biggest fears you may have as a landlord is that one of your tenants will leave damage to your rental that is not covered by their security deposit. It can be a sticky situation and a complicated process to squeeze your tenant for the money that they owe you for the damages they left at your rental property.

The first thing to know is that you did the right thing by asking your tenants for a security deposit. This security deposit is typically equal to one month’s rent and held in an escrow account for the duration of your tenant’s lease. However, the amount and holding do depend on the state where your rental property is located. This security deposit is to use if your tenants leave damage and you need to repair it.

In some cases, you may only need to use half of the security deposit to fix the damage to your rental and then return the rest to your tenant. Other times you may have to use the entire amount of the security deposit and ask your tenant for extra money because it did not cover all of the damage.

We’re here to let you know what to do when you find yourself in this situation. While it can be frustrating and irritating, there are a couple of options you can choose from to get the money your tenant owes you.

damage to your rental

via Pixabay

What Does a Security Deposit Cover? 

The first thing you need to know is what exactly the security deposit can cover when it comes to damage to your rental property. A security deposit can cover just that – damage is done to your property by the tenant. This does not include wear and tear items.

Damages Covered by Security Deposits

    • Excessive holes in the wall
    • Broken fixtures and windows
    • Paint removal from the tenant
    • Stains, burn marks, or holes in carpeting
    • Damage by pets and animals
    • Broken locks and doors
    • Excessive filth in the kitchen and bathroom
    • Extermination of pests or fleas

Damages Not Covered by Security Deposits

    • Faded paint
    • Wearing of rugs and flooring
    • Warped doors
    • Warped windows
    • Broken appliances, but not from misuse
    • Broken lightbulbs
    • Small holes in walls from hanging pictures
    • Broken plumbing, but not from misuse

These are just some of the damages that can and cannot be covered using the security deposit. If you have any doubts as to whether something is covered or not, check the laws in your specific state.

Create an Itemized List of Damages

Once your tenants have moved out of your rental property, it’s time to walk through and see what kind of damage, if any, they have left. Document any damage to your rental property by taking a lot of photos.

After you’ve determined what must be fixed, get quotes from contractors if needed. Keep all receipts of the supplies you purchased or labor you hired to fix the damage to your rental property. This is important as many states require landlords to send tenants an itemized list of how much it cost them to fix the damages left by the tenant.

When you have damage to your rental that the security deposit doesn’t fully cover, include an official quote or estimate for how much is still owed by the tenant to repair the damage.

damage to your rental

Infographic by Brittany Loeffler

Send a Demand Letter

The first thing you should do is contact your tenant directly and ask them for the rest of the money they owe you for the damage they left to your rental property. This letter should be formal, polite, yet direct and enforceable. Make sure to include the correct address and name of your tenant, the amount of the security deposit and when they gave it to you, the itemized list of repairs, quotes and estimates, how much money they owe you, when you expect them to pay you, where to send their check, and a deadline of when they must pay you.

This letter should be short and doesn’t have to be long and in-depth. In fact, there are plenty of sample demand letters for landlords across the Internet to give you inspiration for when you write yours. Do make sure to include the essential information listed above or the letter may not hold up and be enforceable.

Check with Your Tenant’s Renters Insurance

If your tenant took out a renters insurance policy you may be able to put in a claim to have the insurance company cover any remaining cost to repair the damage to your rental property. This shouldn’t take much of your time and is typically just a simple phone call to see what exactly your tenant’s policy covers.

While it may not cover all of the damage, it may cover some. If this is the case, this should be considered a win for you! It is probably easier to get a check from the insurance company rather than your tenant to cover the damage to your rental property.

Go to Small Claims Court

After sending the demand letter and checking your tenant’s renters’ insurance policy and still coming up empty-handed, you may want to consider taking them to small claims court. While this has been effective for many landlords, you should know that it is a long and demanding process.

In small claims court, you won’t hire a lawyer, but you’ll represent yourself and state your case to a judge who will then determine if your tenant legally owes you the extra money for damages. You’ll have to pay a filing fee, which is usually less than $100. This filing fee is returned to you if you win your case but will be kept if you lose your case.

Gather All of Your Evidence

Before going to small claims court, you must gather evidence of the damage to your rental property left by the tenant. This means coming to court with photos of your property before your tenant moved in and then after your tenant moved out. Make sure to caption the photos and explain exactly what was damaged.

Also put together estimates, receipts, and more to verify the amount of money you are asking from your previous tenant. It will also help to bring the lease agreement between you and your tenant, your itemized list, demand letter, and any other written communication (emails, texts, etc.) between you and your tenant in regards to damage to your rental property.

You May Never See the Money, Even If You Win

If you win your case and the judge orders the tenant to pay you the rest of the money for the damages, but your tenant is unemployed or doesn’t have the money to give you, then you won’t see the money. The only thing you can do is put a judgment on your tenant. Until they start working or have the money to give you, this judgment will hang over their heads.

So, if this is the case and you decide to go to small claims court, just know that you won’t see the money anytime soon.

You May be Countersued

Depending on your tenant and the relationship between you two, your tenant may decide to countersue you in small claims court. This shouldn’t be an issue for you if you did everything by the book when renting your property and taking care of maintenance requests. You must be absolutely sure you followed all of the laws in your area or else you could end up owing your tenant some money from merely overlooking something in the rental process. However, if you know you did everything correctly, then you should proceed with going to small claims court to collect your money.

Hire a Collection Agency

Your last option as a landlord seeking money for damage to your rental property is to hire a collection agency to track down and get the money from your tenant. Be careful with this option, though. Some collection agencies have been known to take less than legal actions in order to collect money that is owed. Do your research and read reviews of different agencies before you decide to hire one.

Take the Loss

There are some situations where you may have to swallow your pride and take the loss. It may not be worth chasing down your previous tenant for the money that they owe you. Take this as a learning opportunity as to what not to do and who to rent to for next time.

damage to your rental

via Pixabay

How to Prevent Damage to Your Rental Property

It’s important to be proactive as a landlord and take the necessary steps to avoid the chances of your property being damaged by your tenants. There are quite a few ways that you can do this. It may seem time-consuming and meaningless at first, but when you realize just how much money and stress you can save yourself, you’ll want to implement these procedures for every tenant you lease a rental property to.

Screen All Tenants

Unfortunately, not everyone in the world is honest and loyal to contracts that they sign. When someone is interested in renting your property, your first instinct is to jump at the chance and send them a lease because you don’t want to risk having a vacancy. Before you do this, make sure to meet and interview your prospective tenants.

Ask your prospective tenants to fill out an application stating as much information about themselves as possible. Request references from past landlords and if they have ever been evicted before. Run a background and credit check to make sure they will pay their rent on time each month. Sit down face to face and ask them questions about their lifestyle and previous experience with landlords. You can tell a lot about a person just from a 15-minute conversation!

You want to make sure that you are renting your property to someone who is trustworthy and who respects the space where they live.

Conduct Walkthroughs of the Property

You’re a busy person, we get it! However, if you take the time to conduct multiple walkthroughs of your rental property with your tenants, it will decrease the chance of damage to your property. This should be done before they move in so you can show them exactly how the property should look when their lease ends. This is also a chance for them to point out damage that is already present and was not their fault.

Throughout the lease, you can schedule a walkthrough of the apartment just to check up and see how they are taking care of your rental. It’s important to remember to schedule at least 24 hours in advance or whatever is stated on your lease. This is also a great opportunity to talk to your tenants and see if they need anything at the moment.

Lastly, before your tenants move out, walk through the apartment with them, and identify any damages that you may take out of their security deposit. This gives them the opportunity to repair the damage themselves in order to receive their security deposit back in full.

Require Renters Insurance

Many landlords require their tenants to take out a renters insurance policy. It is possible to add a clause in the lease stating that tenants must have a policy and provide the information to you in order to rent the property. This can help with any excessive damage and liabilities that may occur in the duration of your tenant’s lease.

Cover Your Damages

There are four options when it comes to collecting money from your tenants when their security deposit doesn’t fully cover the damage to your rental property. You can contact them directly with a demand letter in hopes that they will pay you. You can take them to small claims court, where you’ll have to gather evidence and present your case. You can hire a collection agency to chase them down for the owed money. Or you can take the loss and learn for next time. In any case, it’s important to take precautions and thoroughly screen your tenants and conduct walkthroughs of the property to prevent this situation.

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