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What Can Be Deducted from a Security Deposit? | Coos Bay Property Management

What Can Be Deducted from a Security Deposit? | Coos Bay Property Management

After a tenant moves out of your Coos Bay rental property, you’ll need to begin preparing that home for a new tenant. Part of the process will be evaluating damage and wear and tear, and returning the security deposit of the tenant who has recently moved out. 

Many rental property owners stumble through this process, because it’s not always clear what you can and cannot deduct from the tenant’s security deposit. We’re clearing up some of the confusion, and walking you through the Oregon security deposit laws that govern when you return the deposit and what you can and cannot use it for.

Oregon Security Deposit Laws

You know why you collect a security deposit; it’s to protect you in the event that a tenant owes you money later on, after the tenancy. Landlords are free to require deposits in any amount unless you are also requiring the last month’s rent be paid before move-in. If you collect both first and last month’s rent, you cannot charge more than the equivalent of one-half a month’s rent as the security deposit. 

In Oregon, all deposits are refundable. There have been some updates to the security deposit laws in Coos Bay and in Oregon over the last few years, and it’s important that you remain in compliance. 

First, you’re required to accept three-month installments if that’s the only way your approved tenants can pay the full security deposit amount. If they make a reasonable request for this payment arrangement, you must accept it. 

You need to provide your tenant with a move-in condition report when the lease is signed and before the tenancy begins. Your tenant has seven days to identify any damage or imperfections in the property that are not listed on the condition report. This will help you when you’re determining what to deduct from the deposit at the end of the lease term. 

Make sure you’re holding your tenant’s security deposit in an account that is separate from your personal account within two weeks of receiving it. The lease must reflect the name and address of the financial institution where you’re holding the deposit. 

After the tenant has vacated, you’ll need to provide an itemized list of any deductions you’ve made to the deposit and send it to the tenant with any deposit money that remains within 31 days of move-out. Your tenant can also request a Rental History Form, which reflects their rental payment history. 

Deductions from a Coos Bay Security Deposit

What are some of the reasons you might make deductions from a security deposit? There are three specific reasons you may keep all or some of the tenant’s deposit money. In Oregon, landlords can withhold a security deposit for: 

  • Unpaid rent.

  • Repairs to the property for damages caused by the tenant or the tenant’s guests. 

  • Cleaning that returns the property to the level of cleanliness it was in at the beginning of the lease term. 

Those are the things for which you can charge the deposit. However, you cannot charge the security deposit for general wear and tear that is expected to occur when you have people living in a property. Those small nail holes and the scuff marks from furniture are your responsibility to repair. 

Can you be sure you’ll know the difference between normal wear and tear and tenant damage? This can be a somewhat subjective area, and it will often come down to reviewing the property condition at the beginning of the lease term and the end of the lease term. If the screen door was off its hinges when a tenant moved in, you cannot charge the deposit to replace that door. But if a tenant’s child threw a baseball through a window and broke it, you can charge the deposit to replace the window and clean up whatever mess the damage left behind.  

Documentation and Coos Bay Security Deposits 

A well-documented condition report at the beginning and end of a tenancy will help you determine the difference between damage and wear. Not only do you want to document the damage, you also want to document what you spend repairing the damage. 

When there are repairs to be made after a resident leaves and you know you’ll be charging the security deposit, make sure you can provide the necessary invoices and appropriate bills and receipts to back up those charges. You cannot make sweeping or random charges. They have to be specific to what you spent. This will go along with the security deposit accounting statement to the resident who has moved out. Be clear about the deductions you’ve made and the balance that the resident is getting back, and have supporting documents to match.  

As you’re returning the deposit and/or the statement, make sure you’re timely. You cannot miss the 31-day deadline, otherwise you may find the courts requiring you to return the entire deposit and then an extra punitive payment that could total up to three times the deposit amount. Return any deposit that’s left over to the tenant’s last known address (always get a forwarding address when tenants leave). 

Communicate with Coos Bay Tenants During and After the Tenancy 

Good Tenant RelationshipA good tenant relationship will help you avoid tenant disputes and conflicts during the security deposit return. Make sure you’re communicating openly and freely. Pay attention to all legal timelines and requirements to avoid any disputes, lawsuits, or claims. Remember that setting clear and consistent expectations early in the lease period can help you establish a better relationship and potentially avoid disputes later on. 

Talk to your tenant about what you expect the property to look like when they move out. Include this information in your lease agreement, and when your tenant provides their notice to vacate, be sure to reiterate those expectations. Provide a list of things that the tenant needs to do to get the full security deposit back. This will give them plenty of time to return the property to the same condition it was in when they took possession. 

We can help you avoid mistakes with security deposits in Coos Bay. If you have any questions about how to manage this process, please contact us at Oregon Bay Properties.