landlord/tenant Q&A

LAURENE H. YOUNG, (B) MPM, RMP, REALTOR
Young Hawaii Homes, Inc.
2011 President, Oahu Chapter
National Association of Residential Property Managers

Here are more questions asked at our August 20, 2019 seminar that was attended by almost 300 people.

Q. Do I need to put the security deposit in a separate interest-bearing account? Who does the interest belong to? A. There is not requirement for individual owners to have the security deposits in a separate account. But remember that the money is not really yours. It belongs to the tenant unless they (1) cause damage to your unit, (2) owe you money for back rent, (3) fail to return all keys including key fobs, parking cards, garage door openers or mail box keys, (4) fail to clean the unit, (5) fail to pay for utility services not covered in the rent or (6) wrongfully ends the lease early. To prevent yourself from spending that money, it is probably a good idea to keep it in a separate account. If it’s in an interest-bearing account, any interest accrued would belong to you (other states have different requirements). If you are a licensed realtor, you do have a requirement to keep all security deposits and owner funds in separate accounts from your company money.

Q. Is it required for all deposits to be mailed via USPS certified mail? A. This is not a requirement but is proof of the date of mailing so your tenant can’t claim that you did not send them the deposit within the time frame. You have 14 calendar days to return the deposit so make sure that your postmark is before midnight of the 14th day after the date of termination. If your tenant states that they will pick the check up from you, make sure they pick it up by the 14th day. If they do not, put it in the mail, preferably with proof of mailing. If you do not have a forwarding address for the tenant, mail it to the last known address (the address of the unit you rented to them); either it will be forwarded or returned to you.

Q. If the tenant’s last day is the 30th, they text you on the 20th they left the unit. When does the 14 days return of deposit begin? Do I have to refund them a prorated rent? A. If the tenant had let us know that their last day was the 30th and paid rent until that date, we would not return any prorated rent if they left a few days early. The 14-day countdown would begin when you receive the keys from them. So, whether they mail the keys to you or drop them off to you, start counting from the date you receive them.

If they are going to leave them in the unit, get their permission to go into the unit and begin counting from that date.

Q. It is stated in our lease that the cost for cleaning, to rekey door locks and to service the A/C unit will be deducted from their security deposit. Is that ok to deduct? A. There are companies that require that units be professional cleaned when a tenant vacates and do charge the security deposit. That is fine so long as the tenant is aware that this will be happening when he signs the lease. This ensures that the next tenant is getting a clean unit with new keys.

Q. The tenant did not return the property inventory and condition report despite numerous requests. What should I do? After the tenant moves out, will I have problems if they dispute discrepancies? A. Hopefully you took lots of date stamped pictures of your unit before your tenant moved in. In fact, both you and your tenant should have taken pictures. This should be your proof of any damages without a written inventory & condition report. In the future, you should go through the form when your tenant moves in and have them sign it at that time while you are both there. In the absence of both pictures and a written inventory and condition report, the condition at the end of the lease will be presumed to be the same as when the tenant first moved in. So, even if the tenant left the unit with lots of damage, you might not be able to deduct it from their security deposit.

Q. Is the fee for this seminar a tax deduction for a mom and pop rental? A. Each individual case is different, but generally this would count as a tax deduction. Check with your tax professional to see if you qualify based on your income, but even if you don’t, you will gain a lot of practical knowledge from going to any class that can help you manage your property.