Explore effective strategies for landlords when the security deposit falls short of covering unpaid rent. Manage loss like a pro!
Strategies for Landlords: When the Security Deposit Doesn’t Cover Unpaid Rent
Property is regarded as one of most the stable investment options. Once you have secured a quality tenant, you can rely on them for consistent rental income on a monthly basis. In addition to this, you can request the tenant to pay a security deposit. The deposit should protect the property from violations of the rental lease agreement.
One common lease violation to protect yourself against is unpaid rent. As a rule of thumb, however, the security deposit equals the amount of one month’s rent. So, what happens if the unpaid rent is more than one month’s rent? In this article, the team from Keyrenter South Florida advises property owners on how to address such a situation!
Communication
As mentioned earlier, the security deposit is in place to protect the property owner from any mishaps and tenant-caused damage. Generally, landlords are allowed to withhold the security deposit and make deductions to cover property cleanings and repairs when the tenant causes excessive damage. You are supposed to give an itemized list of all the deductions and the balance sent to the tenant.
In some cases, however, it could be that the deductions, including unpaid rent, supersede the total amount of the security deposit. The first step should, therefore, be to communicate this to your tenant using a demand letter.
The demand letter should be as detailed as possible and include cleaning fees, damages, unpaid rent, and any penalties accrued. Be clear on when you expect to receive the amount that is owed to you. You should also include the acceptable methods of payment. Finally, add your phone number and email address should the tenant want to get in touch with you and discuss the contents of the demand letter.
Small Claims Court
A demand letter doesn’t always have the effect that you might want on the tenant. A tenant may choose to ignore your letter. This would be the time to escalate the issue to the small claims court. But, before you to court, you will need to prepare your case and do your due diligence on the court process.
Consider the following as you escalate the issue to the small claims court:
- Time – You will need to prepare a full-proof case against your tenant, collect and organize the evidence, and also research the small claims court process. This can be very time-consuming so you must prepare accordingly.
- Funds – Regardless of whether you win or lose the case, you will need to pay a filing fee to the court. Due to the technicality of the matter, a property owner might also choose to employ a property lawyer.
- Lack of Evidence – Since you are the applicant, you will need to provide evidence of the accusations levied against the tenant. Should you lack evidence, your case might be thrown out. It’s therefore important to keep detailed records of the tenant’s violations and any communication you’ve had with them.
- Countersuit – When bringing forward a suit against your tenants, there’s always a possibility that they’ll try to countersue.
Regular Inspections of the Property
Property inspections are key to maintaining the condition of the rental. You can inspect how the tenant maintains the unit and whether or not they’re abiding by the lease. Inspections also allow you to detect property issues before they become larger and more costly. During the property inspections, look out for the condition of appliances, floor/ wall damage, and pet stains & odors.
You should, however, be aware of the tenant’s right to quiet enjoyment of the property. So, while you want to conduct regular inspections, this law should be complied with. Only inspect the property a few times per year as per the provisions of the law.
Walk-throughs
Before the tenant moves out, you should perform a walk-through of the property. Together with the tenant, you should be able to note what needs to be worked on. Give the tenant a list of what they need to remedy before moving out. Allow them some time to fix any damages to reduce deductions from their deposit.
The Importance of Tenant Screening
There’s no substitute for a comprehensive tenant screening solution. It’s the first defense against problematic tenants and when done well, offers property owners peace of mind and protects their interests.
Screening is all about assessing whether the tenant can meet your expectations and abide by the lease. It typically involves carrying out several checks including rental history, employment history, credit history, and criminal background assessments.
You should also consider renewal screening checks. After some time on the property, you should request updated information from your tenants to perform renewal screening checks. This is often done during the renewal of the lease agreement.
If you need help with the screening, consider parenting with a trusted property manager like Keyrenter South Florida. Our tenant screening solution is thorough and compliant with the provisions of the Fair Housing Laws ensuring peace of mind to property owners.
Bottom Line
While it is a stable option, rental property investment comes with its own set of challenges and problems. A security deposit can help serve as protection against some of these risks as can a thorough tenant screening process. You should also consider hiring an experienced and professional property manager. For property owners and investors in Florida, the company to rely on is Keyrenter South Florida.
Keyrenter South Florida is relied upon by dozens of property owners to advise on their day-to-day problems. We have a well of experience having operated in the market for several years. With us as your property managers, you can be assured of a smooth and seamless property experience. Get in touch with us today to learn more about our property management services.