Security Deposits & Move Out Accounting

SECURITY DEPOSITS & MOVE OUT ACCOUNTING

Market forces influence the amount established for security deposits at properties. Typically an average security deposit has historically be set at about 75% to 80% of the initial rent amount. If the potential tenant’s screening has some weaknesses (which don’t result in a denial) then the market says to charge a full month’s rent or more to cover the additional risk to the owner. Since pets automatically increase the risk of property damage, it is common to charge an additional deposit per pet.

Even though deposits have risen steadily over the years, costs to perform vacancy turnovers have risen extremely more quickly. Property owners lament the fact that a tenant’s security deposit is not enough to cover the costs of the turnover, but market forces are very hard to ignore.

There is nearly no other area of more contention than the inevitable disputes created after the move out accounting process.  Occasionally, there are errors found and corrections made, but these account for about 1% to 2% of the disputes. Most angry past tenants come from the fact that their accounting shows that they owe a balance after move out and have 15 days to make arrangements or they will be turned over to collections. It’s a business relationship with a business-like close out process.

Angry people seem to always dispute what our evaluation walk-thru report says, rather than specifically address which charges they disagree with overall. We get long, rambling letters and it is difficult to reconcile which charges they are actually disputing and address that specifically. As stated earlier, we almost never find actual errors or oversights, so normally after a thorough review by our Resident Committee; we issue a letter stating that the charges will stand as assessed. This is when the gloves normally come off and things really get rough.

We have evidence to depend upon in our review. We have all of the invoices before they move in, marketing pictures of the unit before they moved in, their move in condition report in their own handwriting, recurring evaluations during their tenancy, tenant notes regarding behaviors or problems during their tenancy, notices issued during their tenancy, our move out evaluation of the property condition, pictures of the conditions, work orders issued and invoices from vendors. It is difficult for a tenant to repudiate our evidence with evidence of their own. It needs to be solid, such as dated and certified documentation and date stamped pictures.

As I said, when the gloves do come off; it can really be a bloody battle. Past tenants don’t accept not getting their way very graciously and can get downright nasty. The threats always come out be it physical harm or lawsuits. The most common these days is to damage a company’s reputation by making complaints to the BBB, Oregon Real Estate Agency, City Council, individual City Commissioners, Yelp and all other social media.

To recap, we really don’t assume that we are infallible. We are happy to look at disputes that are presented in writing with evidence against the previously gathered up evidence we used to come to our original conclusion. However, after responding multiple times to a dispute; it is extremely frustrating to face what can only be called harassment from past tenants. We do not take retaliatory measures nor file nuisance suits against people for harassment. However, no matter how you slice it; harassment is harassment.