You've just handed over the keys to a new tenant, feeling confident about your investment. Fast-forward a year, and they're moving out. The walls are scuffed, the carpet's stained, and they're demanding their full security deposit back. Do you know your rights?
Security deposits can be a landlord's best safeguard - or a legal headache waiting to happen. Missteps in handling deposits can lead to disputes, lost money, or even lawsuits. So how do you educate yourself? Read on to find out more.
Landlord. Security Tips: What is a Security Deposit?
A security deposit is collected at the beginning of a lease. It's a safeguard for landlords against potential losses due to tenant damages, unpaid rent, or other issues that may arise during a tenant's stay.
In Wisconsin, the maximum security deposit can't exceed one month's rent. Landlords must return the security deposit to the tenant within 21 days after they move out, minus any deductions.
The Importance of Documentation When Handing Tenant Deposits
One critical component of managing security deposits is documenting the condition of your property before and after a tenant moves in and out. This includes taking photographs and maintaining comprehensive records. Having this documentation can be invaluable if a disagreement comes up.
When new tenants move in, do a property inspection together, noting any existing damages. When they move out, conduct another walkthrough and again document everything with a dated record. This way, both you and your tenant will have a clear understanding of what to expect when it comes to the return of their security deposit.
Short Term Rentals and Security Deposits
For those involved in short-term management in Wisconsin, the approach to security deposits can differ. With short-term rentals, you may not always collect a full security deposit.
Instead, some landlords opt for a damage waiver or insurance. This can protect against potential losses while still being attractive to guests.
Common Mistakes to Avoid
When handling security deposits, many landlords make mistakes that can lead to disputes or legal issues. For instance, failing to provide a written lease agreement that clearly outlines the security deposit policy creates uncertainty and may disadvantage landlords. Each agreement should specify not only the amount of the deposit but also the conditions under which it may be withheld.
Clearly communicate deposit policies in advance to tenants. Provide them with a checklist of expectations regarding upkeep and maintenance. Secure security deposits in a separate trust account.
Landlord Responsibilities: Stay On Top of Documentation
Documentation is always important when it comes to security deposits.
Track all communications related to security deposits, including:
- Agreements
- Notices
- Reasons for deductions
Utilize property management software for efficiency. If you struggle to stay on top of everything, don't be afraid to hire property management services.
Your Turn to Succeed With Security Deposits
Clearly, there's a lot you need to understand about security deposits. Hopefully, with this information, you will have an easier time.
At PMI Fox Valley, we take the guesswork out of managing deposits, tenant screening, and lease agreements so you can focus on growing your investment. Our team has over 30 years of management experience, so you know you can trust us with your property.
Let us handle the details while you enjoy the returns. Contact us to learn more.
