The Residential Security Deposit – Who gets to keep what?

Almost all property owners (wisely so), as a condition of or prior to entering into a rental agreement, require tenants to pay the property owner a lump monetary sum to be held in escrow. This monetary sum is what is known as the security deposit. The purpose of the security deposit is to provide the landlord with funds in the event the lease is terminated and the tenant has caused damage to the property.

Many landlords and tenants alike are unaware of or do not follow the proper procedure in regard to the security deposit upon the termination of the rental agreement. This can cause issues and result in the loss of money for the landlord and tenant.

The law governing the disposition of the security deposit upon the termination of a residential lease is set forth in the Pennsylvania Landlord and Tenant Act. It is important for property owners and tenants to be aware of the Act’s requirements.

Within thirty (30) days of the termination of a residential lease, a landlord is required to provide the tenant with a written list of damages to the property that the landlord believes were the fault of the tenant. If the damages are less than the security deposit, then the landlord is required to return the difference. Failure to follow this procedure precludes a landlord from retaining any portion of the security deposit and from filing suit against the tenant for damages to the property.

Many are unaware that if the landlord fails to follow proper procedure they may actually be required to pay damages to the tenant. If the landlord fails to return the difference between the security deposit and any actual damages to the property, the landlord may be liable to the tenant for two times the amount that the security deposit exceeds actual damages to the property.

The act specifically provides that a tenant may not waive these protections through the lease agreement, and that any attempt to do so is unenforceable.

There are two important caveats governing the disposition of security deposits:

• All of the protections afforded to the tenant are only available if they have properly paid their rent. In other words, nothing prevents the landlord from refusing to return the security deposit if the tenant has not paid their rent; and
• Tenants must provide the landlord with their new address in writing upon termination of the lease. Failure to do so relieves the landlord of their previously discussed obligations.

If you have any rental questions or concerns, one of our real estate attorneys can help. Contact us today!

This article was written by attorney Bret M. Wiest.