Did you know many landlords still treat security deposits as a unique source of income? This practice not only misses the point of collecting a deposit but could also land a landlord in legal hot water.
Collecting a security deposit has many benefits for the landlord and the tenant. However, you can only enjoy these benefits fully if you collect and manage your security deposits correctly. That's why we've compiled these five things you should know about security deposits in Puyallup, WA.
1. Recent Changes in Security Deposit Laws
Laws change every so often, and landlords need to stay on top of the shifting legal sands. On July 23rd, 2023, there were significant updates to the laws governing residential leases.
Most of the law's updates codify best practices, such as giving tenants detailed documentation about what happens to their deposits. Standardizing documentation requirements also opens the door to more efficiency, leading to fewer disputes between tenants and landlords. The new law also streamlines many legal procedures, like allowing eviction hearings to be heard remotely.
2. No Limit to Security Deposits
One thing the law did not add was a security deposit limit. Washington remains one of the states with no legal limit to the amount of security deposit the landlord may collect.
This doesn't mean collecting a massive deposit is a good idea. Overcharging on a tenant security deposit might make the upfront cost of renting too high for potentially good tenants.
3. Security Deposit Management
Rental property deposits must be kept either in a trust account, bank account, or with an escrow agent. Landlords must also ensure that their chosen service is located in Washington State. Landlords are entitled to keep any interest accrued in these accounts.
4. When and How to Withhold Deposits
Security deposits act as a reserve of cash that the landlord can claim if the tenant breaches one of their obligations. The three most common are non-payment of fees, unpaid rent, and property damage.
If you withhold from the deposit, you must provide exact receipts showing how much they owe you (for fees and rent).
For property damage, you must first do an initial inspection and list any problems before the tenants arrive. When they leave, do an outgoing inspection and make a list of any damage that's beyond fair wear and tear. You can then deduct what it costs to fix the damage, and you must give copies of the receipts to the tenants as well.
5. How to Return Deposits
If you have tenants who have never breached their obligations, you must return their deposit. In Washington State, you must do this within 30 days of the tenants moving out.
Manage Your Security Deposits Professionally
There's more to managing security deposits than the average property owner might think. Specific laws govern where you store the deposit, how to manage withholding and returning deposits, and for what reasons a landlord is allowed to withhold a deposit. These laws are also subject to change, which means landlords must stay current with the shifting legal environment.
Having a property management company on your side to give you landlord tips can help a lot. The SJC Management Group offers one of Washington's most experienced and innovative services. Find out how we can help you with professional security deposit and property management today.
