Landlord Remedies When Security Deposit is not Enough to cover Damages
Being a Landlord, you can find yourself in muddy waters if your tenant has damaged the place and the security deposit is not enough to cover the damages. Now the cost of bringing back the property to a tenable condition is surpassing the tenant`s security deposit with you. The damages are more than just normal wear and tear. If this is your case, let`s dive in straight to the article. Know what are the remedies for the landlords to cover the cost of damages when the security deposit is not enough?
Every State has damage deposit laws on when a landlord can keep the security legally. The landlord can withhold the deposit if the tenant has done damages that are beyond normal wear and tear. The deposit will refund only after deducting the expenses incurred in repairs. But, if the security deposit is not enough to cover damages; you can claim the extra money from the tenant for repairs. One can claim from a tenant in four ways.
How to claim Money when the Security Deposit is not enough?
Your tenant is reaching towards the end of lease and decided to move out. You inspect the property a few days before the tenant is supposed to move out. On inspection, you find multiple levels of damages to the property which are far away from normal wear and tear. You immediately call your tenant and ask to repair the same before moving out. But the tenant fails to repair those damages and move out.
After moving out, the tenant demands the refund of the deposit for which you have denied. You withhold the deposit by giving an itemized statement of expenses that are going to incur in repair. But, the repair company has estimated you charges in which the security deposit is not enough to cover. Now, in this case, you can employ one of these remedies according to your situation to get the money from the tenant they owe.
1. Demand Letter
You can send a demand letter to collect the money owed by the tenant. The demand letter is a formal document that is sent to a debtor to collect the money owed. In your case, you will send a demand letter to your tenant. You need to include details like their security deposit is not able to cover the cost of the repairs.
And hence, you are requesting your tenant to pay the amount owed to a certain date. The demand letter is a formal letter notifies the tenant that failing to pay till a certain date can incur legal liability. Your tenant now is compelled to take action immediately and fulfill the Landlord obligations.
You have already sent many friendly reminders but this time your intent in the demand letter should be loud and clear. If the unpaid amount is not paid till the due date, matters will escalate legally. So, sending a demand letter will provide you an upper hand and will help you if you ever have to take the matter legally.
However, never go off-board by writing something threatening and insulting in the demand letter. It can ruin your chances as you are condemning the law of the Fair Debt Collections Practices Act. You must send the demand letter with an attached itemized bill of expenses to ensure fair practices.
A Pro Tip for landlords here is to always send the demand letter with a certified mail and requesting a return receipt. This will act as proof that you have tried on your part to clear the issue peacefully. The court will then have you in good faith that you have tried and values the time of the judicial services.
2. Small Claims Court
A Landlord can sue the tenant for damages beyond the security deposit in the small claims court. Generally, you can make claims on debts up to $10,000 in small claims court. You have already tried collecting the money owed by your tenant by sending the demand letter. But, the tenant didn`t respond on it and is failed to pay the amount.
You can now sue them in small claims court for damage disputes and money owed. However, there are statutes of limitations on initiating the legal procedure. The legislative bodies have set a time and only after which a legal procedure can be initiated. A landlord may have to wait for 1 year to 4 years after the issue before filing it with claims court.
How To File The Case?
To initiate the case, you need to file a statement of claim with the court. As a plaintiff, you file your case in court demanding the collection of unpaid money from the defendant (Tenant). The court gives the defendant a time of 28 days to respond to the settlement of a claim. And if the defendant fails to respond, you can file for a judgment.
The court requires you to prove that you or your LLC has entered a contract with the defendant. And the defendant now owes the money and has not paid it yet. The case will simply bring in your favor if you can prove that you have held up your part well.
For the case, always take the documents like Rental Agreement, Photographs of move-in and move-out condition, and the Itemized Bills of Repairs with you. Also, take the demand letter and its receipt with you. All these documents will help you prove your part in front of a judge. Do prepare an oral testimony for the proofs, you will take to the court.
If everything goes fine and judgment comes in your favor, the judge will order for the collection of money. The collection order can include the collection of the money owed, interests on that money, and the court costs. With this collection order, you can ask the court to give you a lien if the tenant has some personal property. Or you can request the court to garnish the tenant wages or the tax refunds to pay the debt.
Read: What if You don`t use a Custom Lease for Tenants?
3. Seeking Restitution
In case you are suffering from huge costs on damages due to vandalism by your tenant. You can recover that cost by seeking restitution. You can file a lawsuit against the tenant who has damaged the property by willful intentions.
The damages like shattered mirrors, graffiti, broken bathroom tiles, and big holes on walls come under vandalism. If your tenant costs you damages that come under vandalism, you can seek compensation in such cases.
File a case with a civil court and the court will order fines and restitution to the tenant. The judge will determine the act of vandalism as a misdemeanor or felony according to the costs occurred in damages. The penalties are decided accordingly and the defendant can be penalized for fines, imprisonment, or both.
Unlike the cases in small claims court, these vandalism cases are treated as a crime. Being a crime and a threat of getting jail can motivate your ex-tenant to pay the money owed. Always ensure you have the right evidence to connect this tenant to the damages that occurred on your property.
4. Hiring a Debt Collector
The ultimate and probably the last remedy for a landlord to collect money owed by ex-tenant is to hire a debt collector agency. These debt collection agencies are professionals and help you recover the amount due to the tenants.
The debt collection agencies keep some amount of the owed money with them and recover the rest for you. The collection agencies employ various strategies to recover the money for you. They call the debtor on their phone; show up at their workplace, or even showing up at the door of their home.
Furthermore, these debt collection agencies also report the payment defaults by the tenants to the credit bureaus. The credit bureaus can mess the credit score and ruin the chances of your tenants to secure any loan in the future. This can compel your tenant to pay the amount due as soon as possible. However, each state has specified the statutes of limitations for the debt collectors to sue the debtors for the amount due.
The Bottom Line
There is no good in landing to a place where things go out of your control or become difficult to control. In the case where the damages can`t be covered by deposits, the Landlord Insurance can become a savior for you. Also, adopt the habit of successful landlords to regularly inspect your rental property to avoid any kind of serious damages that can cause you to lose your money.
Also, remember to always adhere to the Security Deposit Laws governed by the State. Never ever mistake to deduct or withhold the security illegally. When you are holding the security or using it, you are required to give an itemized bill of deductions to your tenant.
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