What to do if the Deposit Doesn’t Cover Unpaid Rent

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As a landlord, you probably require tenants to pay a security deposit as part of the initial move-in costs. A security deposit can help insure you against numerous potential liabilities that can arise during a tenancy, including unpaid rent, missed rent payments, and damage exceeding normal wear and tear.

That said, just because you collect a security deposit doesn’t mean it’ll always cover such costs in their entirety. And in such a case, what options would you have?

This brings us to today’s topic: what would you do if the deposit doesn’t cover unpaid rent? Here’s everything you need to know.

Withhold the Tenant’s Security Deposit

As a landlord, you have a right to withhold the tenant’s security deposit for certain legitimate reasons. Including:

  • Unpaid rent. A lease usually requires a tenant to pay all due rent under the lease before moving out.
  • Unpaid utilities. A tenant must clear all unpaid utility bills before moving out, such as electric and gas bills.
  • Cleaning costs. A lease usually requires a tenant to leave their rented premises in the same move-in condition.
  • Excessive damage. A tenant must fix all damage exceeding normal wear and tear before moving out.

If a tenant moves out without fixing such issues, the landlord can withhold part or all of their security deposit. The withheld amount must, however, be appropriate depending on the nature of the lease violation.

But if the damages exceed the security deposit amount, you may need to send the tenant a demand letter for the amount owed.

Two tenants having a discussion in a room with moving boxes.

Write the Tenant a Demand Letter

The purpose of the demand letter would be to make the tenant aware of the rent that they owe you. Make sure to specify certain things for the avoidance of doubt. Including, the amount owed, the lease violation in question, and the deadline for payment.

You’ll also want to make sure the demand letter contains your contact information for ease of communication.

There is a possibility that the tenant may choose to ignore the demand letter. In such a case, consider a legal recourse. Specifically, filing a case with the small claims court.

Unlike conventional courts, small claims courts have certain pros. Including, simplified procedures, speedier resolution, lower costs, and ease of accessibility. That said, small claims courts have their fair share of downsides as well.

  • Can be time-consuming. Among other things, you’ll need to gather enough evidence, prepare for the case, research the small claims processes, and attend the court hearing.
  • You’ll need to part away with a small filing fee. In Maryland, for instance, the amount is about $44.
  • Collecting the money may be a challenge. If the tenant doesn’t have the money to settle the dispute, you’ll have to wait until they are in a position to pay it.
  • The evidence may not be convincing. For instance, when it comes to damage exceeding normal wear and tear, you’ll need to have proper documentation.
  • The lawsuit must not exceed a certain amount based on state laws. In Maryland, the amount you’re suing for must not exceed $5,000.
  • The tenant may file a countersuit. Be prepared for the possibility of a countersuit from the tenant even after doing everything by the book.

A judge’s gavel.

The tenant can, for instance, try to allege landlord harassment, uninhabitable living conditions, or even discrimination based on federally protected classes. As such, before considering a legal option, make sure you’re doing everything by the book.

Inspect the Property Regularly

Savvy landlords usually agree on one thing – regular inspections are the key to success! When you inspect your property regularly, you’re able to catch issues quickly.

For instance, you may be able to catch issues like property damage, unsanitary living conditions, unauthorized modifications, and even illegal activities.

Be mindful of the tenant’s privacy rights during these inspections, though. Don’t barge in unintended, for example. Let the tenant know of the visit beforehand. Ideally, serve them a 24- or 48-hour advance notice before you go visiting.

Conduct a Walk-Through Inspection

Before the tenant moves out, make sure you do a walk-through of their rented premises. The goal of the walk-through inspection should be to document the property’s condition and allow the tenant time to fix the issues, if any.

Some states mandate landlords to carry them out and others don’t. Maryland belongs to the former group. The following are some things to keep in mind.

  • Landlords must carry out the inspection within 5 days before the tenant moves out.
  • You must notify the tenant in writing of their right to be present during the inspection.
  • You must include the date and time of the inspection.

A person writing in a notebook.

The tenant will then have the opportunity to fix the issues before moving out. If they don’t, you can make appropriate deductions from their security deposit.

Conclusion

There you have it. Some options you could consider if the deposit doesn’t cover unpaid rent. Ultimately, the best way to prevent potentially difficult tenants is by screening tenants meticulously.

McKenna & Vane Property Management can help you in this regard. We’re a top property management company in Maryland that can help you manage your property reliably and professionally. Get in touch to get started!