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Rental Deposits

On Behalf of | Jul 24, 2013 | Uncategorized |



An issue I regularly see in residential landlord-tenant relationships surrounds deposits.  Landlords, it is worth a few minutes of your time to make sure you understand how to apply them.  In the long run, the minimal extra time you spend to follow them could save you thousands that could have easily been avoided.


First, if you are going to require a deposit, there must be a written rental agreement.  The agreement shall include the terms and conditions under which the deposit can be withheld (RCW 59.18.260 of the Residential Landlord/Tenant Act).  


I want to add a point here.  Tenants constantly try to have the deposit applied to an obligation under the lease, such as unpaid rent.  It is your discretion whether to apply it.  I recommend never doing so until you have the unit back and know the extent of other damages.


An additional requirement of RCW 59.18.260 is that there must be provided to the tenant a written checklist.  A piece of advice, have the tenant sign an acknowledgment that you provided the checklist, in case the tenant does not return it, and provide the tenant a copy of this statement.   Failure to provide the checklist could require you having to return the deposit, whether damages by the tenant occurred or not.


Landlords, after receipt of the deposit, the funds must be placed into a trust account and it must be disclosed to the tenant where the funds are being held (RCW 59.18.270).  This is simply accomplished by adding a clause in the lease disclosing the bank it will be held at.


It is common within lease agreements to add language that a part of the deposit is “non-refundable.”  RCW 59.18.285 states that any funds paid that are non-refundable may not be designated as a “deposit” or as part of the deposit.  The rental agreement must clearly state that the fee is non-refundable.  If this is not done, then the “fee” is converted to a refundable deposit subject to the terms of the lease.  The conversion to “refundable” does not mean the tenant is automatically entitled to that portion being refunded.  It simply means that there must now be a basis to retain it as disclosed in the lease agreement.


The most common problems, and where landlords get in the most trouble, arise for deposits after the tenant leaves.  Specifically, when the funds must be returned.  RCW 59.18.280 states that the notice for retention of the deposit, along with any refund due to the tenant, must be given within 14 days of the tenant vacating the premises or the landlord learns of abandonment.  The notice and refund must be sent first-class, postage prepaid, properly addressed to the last known address of the tenant, and placed in the United States mail by the 14th day.


Let’s break this down some.  First, the statement must be a full and specific statement.  Simply stating “damages” or vague language to that affect is not sufficient.  Break it down as best you can. 


Second, a common excuse of landlords is they do not know the “extent” of damages which is why it was not sent within 14 days.  It should not be difficult to enter the unit and determine the damages.  There really is no excuse for this.  The real challenge centers on the actual costs.  For costs to repair/replace, it is sufficient to state an estimate of the costs.  It can be adjusted later.  Do not just make up a number though.  If you can go to a hardware store or have a third party give an estimate, get it.  If that is not possible, then give you best estimate.  Do not be unreasonable though.  $5.00 for a nail is not reasonable. 


Another piece of advice, where possible add repairs into the lease.  For example, if the landlord is going to do the work, put in the lease that the work will be completed at a specific hourly rate. 


Next, the 14 day rule.  This is not a mere suggestion.  Landlords, you have 14 days with one exception, circumstances beyond your control prevented providing the statement timely.  Being too busy is not an excuse.  In my experience, there is rarely a time when the exception applies.


Last, where to send it?  It is common for a tenant to not provide a forwarding address.  The statute states it simply has to be sent to the “last” known address, which can be the unit rented from you.  Do make sure that you send it through the mail, first class, postage prepaid.  This requirement is there because people will put forwarding addresses for their mail.  If it comes back to the unit, simply hold it to prove that it was sent.


These rules may seem a little excessive but regardless they have to be followed.  Courts can and do hold landlords strictly to them on a regular basis.  Believe me when I say it is worth the time to follow them exactly.  Failure to do so could lead to significant costs, including paying up to twice the deposit and attorney fees and costs of the tenant, if they are not followed.  If in doubt give our firm a call and we can discuss what needs to be done.