Security deposits continue to present a very unique set of problems for both property managers and staff alike. Property management companies large and small continue to struggle with this very routine task and often lose money in the process.
The following is an example of security deposit mismanagement and the associated repercussions experienced by the management company.
Company A is a fairly large property management company in a metropolitan area. The company is prominent in the community and handles both residential and commercial properties. Tenant B moves into a residential unit in February and leaves when their lease is up one year later. The unit is not damaged, but there is trash left behind that needs to be disposed of. Tenant B gives the apartment manager the proper notice and provides a timely forwarding address.
It is now nearly four weeks since Tenant B has moved out, but they have yet to receive any correspondence from Company A. Tenant B calls Company A, only to be told that their security deposit was used for cleaning the unit and disposing of trash. Tenant B requests a detailed invoice. Two weeks pass before Tenant B receives an invoice with no detail; just the security deposit amount and a line item that says cleaning and damages.
After doing some very basic research, Tenant B realizes that Company A has violated state statutes which state that all tenants with a valid forwarding address need to either receive a refund of their security deposit or a detailed invoice listing the damages and how the money was used to pay for those damages. It’s now been nearly six weeks, and Tenant B has not received any of those things. Tenant B sends a certified letter, citing those statutes, demanding that their security deposit be returned in full, which Company A ultimately ends up doing.
Company A had a legitimate reason to withhold at least a portion of Tenant B’s security deposit, but they forfeited that right, along with over $1,000, by not providing their former tenants with the information they had every right to receive.
So how does a prominent, experienced property management company make a mistake like this? It could be many things: an untrained employee or an overworked property manager who failed to manage their staff properly. Whatever the reason, until property managers know and abide by the appropriate state statutes, they will continue to suffer the consequences.
Know the Law
An inexperienced employee or a simple oversight can certainly be contributing factors to the above scenario. However, the number one reason this happens is simple: ignorance of state statutes. Each state has differing regulations, and managers must know the statutes that govern the states in which they operate.
For instance, Illinois property management companies must return security deposits or provide itemized statements between 30-45 days after move-out and must also provide an itemized list of damages and charges. Texas statutes are similar with a 30-day deadline for returning security deposits or providing the required itemized listing of damages. California requirements …read more
From:: Property Management