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What to Do If the Security Deposit Doesn’t Cover Tenant Damage? | Portland Property Management

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As a landlord in Portland, maintaining your property and providing a safe environment for the residents who rent your home is one of your top priorities. Even if you’ve screened your residents carefully and even if you have a respectful, professional relationship in place with them, things don’t always go according to plan. Tenants may accidentally – or intentionally - cause damage beyond the amount of their security deposit while they are living in your rental unit. You could find, at the end of a tenancy, torn-up carpets, broken windows, missing appliances, and even trash left behind. 

This is frustrating, especially if you have enjoyed what you thought was a positive and peaceful rental experience. You’ll need to have a plan in place to handle your communication with your departing residents and to try and recover some of the money you’ll have to spend putting your property back together. 

We’re reviewing some of the steps you can take when the cost of tenant-caused damage exceeds the amount of the security deposit you’ve collected. This does not happen very often, in our experience as a Portland property management company. You want to be prepared, however, in case the situation does arise. These steps may help you maintain control over your rentals with confidence, ease, and less financial risk.

Security Deposit Limits in Portland 

In Portland, rental property owners are limited in what you collect for a security deposit and how those funds are collected. The laws are strict, and you must comply with them or face serious penalties and expensive fees. 

Generally, you cannot collect more than the equivalent of one month’s rent as a security deposit. 

If, however, you require that the last month’s rent also be paid as part of the move-in funds, your security deposit can only be the equivalent of one-half of one month’s rent. 

You will have to decide which plan offsets your risk more. Collecting the last month’s rent before a resident moves in will give you some extra peace of mind about having that rental income. If you have to evict a tenant for nonpayment of rent, you still have that last month’s payment. And, you’ll have a security deposit that’s equal to half a month’s rent. 

However, when it comes to paying for damage that’s left behind at the end of a lease term, the equivalent of half a month’s rent might not be enough to cover it. So, it may be better for you not to collect the last month’s rent when you’re negotiating move-in terms and payments. Instead, you’ll collect the first month’s rent and a security deposit that’s equal to the same amount. When you collect the last month’s rent, you can only use it for rent. The security deposit, however, can be used for unpaid rent or damages. 

Receiving a Notice to Vacate from Portland Tenants 

When your tenants provide you with their Notice to Vacate, begin making move-out preparations. 

You’ll want to send your tenants something in writing that confirms you have received their notice and verifies the date that they will move out. Include information on what you expect them to do before leaving the property. This might include returning the keys, removing all personal belongings, and cleaning the property. 

By reinforcing the move-out instructions that are likely in the lease agreement, you’re letting your tenants know what you expect, and you’re reminding the of their responsibilities. 

Creating a Condition Report at the End of the Lease 

At the beginning of the lease period, you and your resident completed a Condition Report, which accurately documented the condition of the rental property at the time of possession. The law requires you to try and schedule a walk-through with your tenant before the lease begins. If that is not possible, you can conduct the move-in condition inspection yourself, generate a report, and leave that report with the tenant to add to or alter during their first seven days in the property. If they don’t make any additions, your report becomes the official Condition Report, which will be useful to you at the end of the tenancy, especially if there is damage that needs documentation. 

When the lease ends, you have up to a week to walk through the property again, documenting the damage that was done. Your tenant has the option to be present for this, or you can do it alone when they do not decide to participate. You are required to provide 24 hours of notice before you conduct this final inspection. 

This is the inspection that will reveal there is tenant damage. You’ll need to document all of it, especially if it goes beyond the amount of the security deposit you’ve collected because you’ll be using the whole deposit to pay for repairs and replacements. 

Take photos and notes and compare the condition of your property at the end of the tenancy to the condition of your property at the beginning of the tenancy. When damage is discovered, you’ll want to prepare an itemized list of those damages, describing the repairs and replacements that are needed. When you hire people to do this work, any labor that’s more than $200 will require documentation demonstrating that labor costs are reasonable and consistent with what vendors charge in Portland. 

You cannot charge tenants for anything that was previously mentioned on the Condition Report. You cannot charge for normal wear and tear items, either. 

Charging Your Portland Resident’s Security Deposit

According to the law, you have 31 days to return your tenant’s security deposit. 

If you are keeping all of the deposit because of damage, you’ll need to send an itemized list of what you are deducting and why. Don’t forget to document the labor costs as well. 

The amount that is still owed should also be shared with the tenants. Let them know how much is needed to bring their account current. You can also tell them the date by which you’d like the bill to be paid, and how they should pay it. 

There’s a chance your tenants will pay what is owed in order to remain in good standing and to avoid further collection efforts. However, if the tenants don’t respond or if they don’t pay by the date you have indicated, you’ll need to decide how much further to push. When they owe $100 beyond what the security deposit covers, it might not be worth it to you. But, if $3,000 of damages are due, it may be worth your time and resources to pursue payment. 

Your options, at this point, include trying to collect the amount that’s due from the tenant yourself or hiring an attorney or a collection agency to do it for you. These options will require an investment of time or money, so prepare yourself for the often frustrating process of trying to cover the expenses by collecting what is owed from the tenant. While it feels good to hold them accountable, the process can drag on, and unless you sue them in small claims court, there’s no guarantee that you’ll even come close to getting them to pay what they owe. 

Preventing Tenant Damage in Portland Rental Homes

Tenant damage is often unpredictable. However, you can take some preventative steps to reduce the risk that your resident is likely to cause damage, especially more damage than their security deposit will pay for. Here’s how to protect yourself and your property:

  • Ask for landlord references when screening residents. Your screening process likely includes checking credit and verifying income. You should also be talking to current and former landlords who can tell you whether the tenant was responsible for their property. Did they get their full security deposit back? Was property damage left behind? These are questions you should as while checking references. 

  • Develop a good relationship with your tenants. You’ll find that the residents you place are less likely to damage your property or pay rent late or violate the lease agreement when you’re working together at taking care of the home. Establish a professional, respectful relationship and check in from time to time. Remind them that you want to hear about maintenance requests right away so you don’t have to worry about the damage that deferred maintenance can do. 

  • Conduct inspections when you can. Any time you have the opportunity to get inside the property, take a look around. Everything should be clean, working, and in its proper place. These informal inspections can be easy to conduct when you’re responding to maintenance requests. 

  • Create a strong lease agreement. Your lease should be very clear on what you expect from your resident and what they’re responsible for when it comes to caring for the property and taking care of damage issues. 

There’s a difference between normal wear and tear, which you’re responsible for, and tenant damage, which your residents are responsible for. When the amount of damage exceeds the money from the deposit that you have to pay for it, you find yourself in a situation where you need strong communication skills and a willingness to be committed to follow-up.

Contact Property ManagementWe can help you take care of and prevent tenant damage in your Portland rental property. Please contact us at PropM, Inc. We are open seven days a week to respond to your Portland property management questions.