Security deposits are a great system to ensure that your residents pay for any damage to your property. However, when you have to take out money from their security deposit to cover damage, it could lead to a dispute. These disputes can become such a headache that often times property managers would just rather take the financial hit of the damage rather than manage the security deposits. To avoid taking on extra costs and dealing with disputes, here is a guide on how to manage security deposits.

Make Sure You Are Taking Fair Deductions

First of all, every state has different rules about the deductions allowed. So before doing anything familiarize yourself with your local laws and understand exactly what damages you can legally claims against residents. When a resident first signs a rental agreement, make sure they fully understand what they will be financially responsible for if there is any damage. Then if you have to make a claim against their deposit, they are also fully informed. Secondly, make sure that the amount you are claiming against their deposit covers the actual value of the damage. You can get repair estimates to gage this value.

Document All Damages

It is great to keep a record of before and after pictures, so that you can prove the damage was the result of resident negligence. Documentation will prove your claims are legitimate in the case of any dispute. Also, make sure you keep a record of any unpaid rents, unpaid utility bills, or other related problems with your resident. If you can, try to present this documentation to your resident before they move out, so they can take the steps to fix any issues. Talking to your resident ahead of time can minimize any security deposit disputes when they move out.

Create An Itemized List Of Deductions

If you have to make a claim on their security deposit, make sure that you present them an itemized list of deductions in writing. List repairs, back rent, unpaid utilities, and any other items your resident is legally financially responsible to pay. Attach copies of any receipts and invoices as well as a highlighted copy of your rental agreement. An itemized list can reduce the possibility of disputes because then your resident knows exactly why you are claiming against their security deposit, rather than just assuming you are trying to unfairly take their money.

Managing security deposits can be a bit of a headache, but if you follow these guidelines, then you can reduce the amount of disputes. If you have good communication with your residents about their responsibilities and exercise best practices, you should be able to manage security deposits without the extra headaches.