At some time in a rental property’s life a tenant will leave and a new one move in. The activities between tenants is called tenant turnover. It’s a lot like preparing the house for rental the first time but there are some differences, so read the blog on that topic. The biggest difference is how repairs are accounted. When a property is first established as a rental all the costs are assigned to the owner. During tenant turnover, some of those costs can be reclaimed from the tenant’s damage deposit or subsequent court action. Knowing which are claimable, and how to document them is the topic of this blog. Documentation After the tenant leaves, as the bills come in for repairs they must be binned into categories: Normal wear and tear, and Damages. The tenant can’t be charged for normal wear and tear. Things like painting, floor abrasions due to walking, loose knobs on cabinets, and leaking faucets are examples. In contrast, clutter, holes in the wall, gouges in the floor, stained carpet, walls painted colors prohibited by the lease, and missing cabinet knobs or doors are clearly damages. Outstanding water and gas/electric bills, prorated for the time the tenant had possession of the property, should also be posted to the tenant’s account. Repair receipts in the exact amount claimed must also be retained. Good photo documentation of damages cannot be stressed enough. Take color pictures of each room before the tenant moves in and then after they leave with particular attention to specific damages. Return of Security Deposit After all the expenses have been recorded and the unit is show-able for re-rent, the landlord must credit the tenant’s account with their security deposit and interest accrued on that deposit. Often the landlord doesn’t credit the interest and the tenant doesn’t know enough to ask about it. In Maryland the landlord must give the tenant 3% APR, simple interest, but only paid in 6-month periods. In other words if the tenant stayed 3.6 years they get 3.5 years of interest, for a 3.4 year stay, they’re only paid 3 years of interest. If security deposit or it’s interest is not paid, the tenant can sue for 3-times the deposit! The Final Statement of Account A final statement of account and any refund must be issued within 45 days after possession was returned to the landlord. Send the statement to the property’s address or a forwarding address given by the tenant. That statement should be sent with a certificate of mailing from the post office. Include a cover letter explaining the charges. If more is owed than covered by the security deposit, give the tenant 30 days to pay or set up a payment plan and then hand the matter over to your collection attorney. Your property manager should handle all the documenting, accounting, and return of the funds, and can guide the owner in deciding if pursuit in court is worthwhile; often it is. Collection is another topic, but carefully documenting the turnover process is key to legitimately reclaiming damages beyond what is considered reasonable and normal. 77th Meridian, LLC manages residential property in Anne Arundel and surrounding counties, and parts of Baltimore City for a monthly fee of 7.7% of the collected rent. Why pay the 10% others charge? We save you TIME and WORRY. . . .
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