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Aug 31 2012

Withholding Security Deposits – Know Your Rights

So many of the disputes between vacation rental homeowners and their tenants every season involve the issue of withholding security deposits after a tenant’s stay. In a previous post, Vacation Rental Security Deposits – Too Much or Too Little?, I discussed such  issues as the importance of requiring a security deposit and why, how much to require, and when it should be returned – assuming there were no problems.  Although WeNeedaVacation.com strongly endorses the use of requiring security deposits for every rental, we are concerned about the number of homeowners who misunderstand their rights concerning the withholding of these funds, the proper process by which they must do so, and the negative impact doing so may have on them in the long run.

What justifies the withholding of security deposit funds?

First of all, read your lease. Hopefully, you use a really good one like the sample one we make available to our homeowners, which includes the following language:

Deposit refunds will be returned within X weeks of TENANT’S departure provided the property is left undamaged and without excessive cleaning required to ready the property for the next tenant.  TENANT agrees to repair or replace any damage to the premises resulting from said tenancy.  Damages that may be claimed by LANDLORD from TENANT are not limited to the amount of the security deposit and shall include any and all costs incurred by LANDLORD to recover such damages including attorney fees.  Any deductions from security deposits will be confirmed with estimates, invoices/statements or receipts for costs incurred by LANDLORD.

Basically, homeowners are justified in withholding funds from a tenant if EXCESSIVE cleaning is required or any of the property has been damaged or removed without being fixed or replaced.

What does NOT justify withholding funds?

•    Normal wear and tear. This is fairly vague, but especially when agreeing to accept children and pets, screens can get somewhat damaged, scratches can occur, shells and candy wrappers can be left behind, etc., and, within reason, this is acceptable.
•    If the property damage cannot positively be attributed to a specific tenant.
•    If the furniture has been moved and not restored to its proper place – unless this has been specifically noted in your lease.
•    If things aren’t left just as you expect but are still within the limits of “broom clean” (not “sanitized” as if ready for the next tenant) and in decent repair.

What steps are you required to take?

In order to withhold funds from your tenant’s security deposit, you must:

•    Notify them immediately, preferably the same day they check out or at least within 2 days
•    Notify them by email, or possibly by phone and then followed by an email or letter – NOT by a text message or by a voice message alone, which can get lost or the tenant can deny receiving it.
•    Document the damage or excess dirt or mess with pictures, if possible, and/or providing receipts or invoices.

Recommendations

•    Be very explicit prior to your tenant’s arrival about what your expectations of them are when they leave your home.
•    If you have specific requirements, particularly if they are out of the normal realm, make sure they are covered adequately in your lease. Read more about preparing your lease.
•    Also, be sure to leave some kind of check-out list in your home reminding them of your expectations. Read more about managing tenant expectations.

Be aware of the possible negative repercussions – is it worth it?

Even though you may be convinced that you are completely within your legal rights to withhold some or all of your tenant’s security deposit, be careful of what may ensue if/when you do.  A relationship which started out very cordial and positive will undoubtedly go sour quickly when an (often unsuspecting) vacationer discovers that he has been accused of  a wrongdoing and will not be receiving some or all of the funds as expected.  The ill will and defensiveness can result in their submitting a negative review to your online listing (and, if it meets our Guidelines, we will need to post it), or even a Formal Complaint, not to mention ruin the chances of their returning for future stays. We have heard from homeowners that they withheld as little as $50-$100 from a tenant and wound up in small claims court with the irate vacationer.

By no means are we suggesting that you never withhold security deposit funds. But it’s critical that you be aware of what’s required of you in order to do so, as well as the possible impact it may have on you or your listing.

Do you have any other suggestions that might be helpful to other homeowners regarding security deposits?

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About the author

Elizabeth Weedon

Elizabeth Weedon - Although I’ve worked for WeNeedaVacation.com since 2008, I’ve been a loyal homeowner on the site since early 1998, just a few months after the website was launched by the Talmadges. I grew up summering on the Vineyard and have managed my family's rental home there since the mid-1980’s. I’m passionately devoted to the Vineyard – and to WeNeedaVacation.com, which I credit with enabling me to hold onto the special property that has been in our family since the 1920’s. An enthusiastic member of the WNAV.com Homeowner Support Team, I am particularly involved with our new listers, providing assistance with the sign-up process and advice about how to create the most effective listing to ensure their booking success with us. I have recently taken over our press and public relations needs. And, with owner Joan Talmadge, I am also responsible for editing and writing much of the content on our website, our monthly newsletters, and the blog posts. My husband and I live in Wellesley where we have raised our 2 grown kids and our Black Lab, Maisie. Email Elizabeth

6 comments

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  1. Gabriele Corbett

    I recently rented a vacation home in Cape Coral, Florida! I paid the deposit, rental amount, and security deposit all in one payment with my credit card.
    The $500 security deposit was subtracted along with the rest of the payments and will now be refunded to me in a check, which I’m still waiting on (today is day 18 since we moved out) Yesterday I received an e-mail stating that the check is in the mail…..
    The contract reads as follows:— The Tenant shall have a $35.00 credit for energy use per week. Every KW above $35 shall cost $0.15. —
    We ended up getting charged over $51 for energy usage, which was subtracted from our security deposit!
    My question is: How can they just subtract the amount from the security deposit? I wouldn’t expect this to happen, since it’s not damage.
    Also, how come the security deposit did not consist of placing a hold on my credit card? Why am I being charged the amount that I have now been paying finance charges on ever since I made the payment?

  2. Marc Goldbach

    Many people might under estimated the power of contract. You cannot be wrong if you request your landlord to bring your contract at home and study it for few days before signing in. Disputes are happening at the end of the last month before moving out. Why wait for that?

  3. Louis Kiefer

    With short term vacation rentals, without a costly meaningful inspection after each rental, it is hard to know who caused the damage. My rental agreement has an affirmative duty of each incoming tenant to inform me of breakage, non operating appliances etc. I do this for two reasons: if there has been misuse of the property I want to know it before I return the security deposit and if repairs need to be made, or other issues attended to, I want to do so to make the present tenant’s life more enjoyable. I ask that notice be made by email. Also, if there are reports of damage, I then ask for photographs.

    1. Elaine Walsh

      Louis, A vacation is suppose to be relaxing. By asking a tenant to come in and take pictures, and emailing the pictures to you, you are essentially asking them to do your own work! Although as a renter I take quick photos of each area before I settle in for my own protection. As renters we pay on average $100 and over for each night, and sometimes much more. Pictures printed out before a rental and signed by both parties seems more fair to me, the renter should not be doing the work for you,It was stressful enough for the renter to find the perfect spot in the first place, then they are expect to find flaws in your rental when arriving, that is absurd. There has to be an easier way, and it should not be at the expense of the renter. If you are in the business of renting it is your responsibility to make the rental as comfortable as possible for the vacationer, not the other way around.

  4. marcia warrington

    Elizabeth, great article, but can you or someone provide us homeowners with the law relative to holding a security/damage deposit? Is it treated differently than the states requirements for a security deposit for a long term tenant? I have not been able to find out much about this subject but would greatly appreciate any information you may have on the subject, thank you

    1. Shannon Russo

      Hi Marcia. It’s difficult to find any specific laws related to vacation rentals in Massachusetts legislature. The entire section of Massuchusetts General Laws c. 186 15B, though all about rental security deposits, is effectually made not applicable by the final provision of the section, or Massachusetts General Laws c. 186 15B (9), which states:

      (9) The provisions of this section shall not apply to any lease, rental, occupancy or tenancy of one hundred days or less in duration which lease or rental is for a vacation or recreational purpose.

      At WeNeedaVacation.com, however, we strongly advise homeowners to still follow the provisions of the law which stipulate an owner must return the security deposit to a vacationer within 30 days of the vacationer vacating the property. In the instance that some or all of the deposit must be withheld, we strongly recommend that the owner provide written notification and proof of the damage in photos within no more than 2 days after the vacationer has vacated the property, and that all receipts, quotes and invoices for repairs and costs associated with the damage be meticulously documented and provided to the vacationer. Best, Shannon

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