If there’s going to be a landlord and tenant dispute, it will likely be over the security deposit. This is an area that gets complicated for many landlords, especially after a tenant moves out. Make sure you understand Virginia security deposit law; otherwise you can find yourself in court, facing a lot of legal and financial trouble.
Collecting the Security Deposit
You are not permitted to collect a security deposit that’s more than the equivalent of two months’ rent. So, if your property rents for $1,200, your tenant’s security deposit cannot be any higher than $2,400. If you sell the occupied property during the course of the tenancy, the new owner will need to collect those funds from you.
Holding the Security Deposit
Some states stipulate where the deposit can be held. However, in Virginia, you can keep it in any bank account. We recommend that you hold it in a separate bank account so the money doesn’t comingle with your own funds. You’re also required to allow the deposit to earn interest at a rate that’s four points below the rate set by the Federal Reserve. You only have to pay that interest to tenants who rent your property for more than 13 months.
Returning the Security Deposit
You’re required to return the tenant’s security deposit within 45 days of the tenant moving out. If you inspect the rental property and find that everything is in good condition, simply return the full amount plus any applicable interest. If you’re going to keep all or part of the deposit, you must document everything.
Conduct a thorough move-out inspection and make notes about general wear and tear as well as damage. It’s important that you know how to distinguish tenant damage from regular wear and tear. You cannot charge your tenant’s deposit for normal wear and tear, which may be small nail holes in the wall or scuffs on the wall where a couch was placed.
You are permitted to withhold funds from the security deposit for unpaid rent, unpaid late fees, unpaid utility bills, and damage that extends beyond reasonable wear and tear. If you violate any part of the security deposit law, you’ll be required to return the tenant’s full deposit plus damages and attorney’s fees.
If you believe you’re going to withhold money from the deposit, you need to let the tenant know within 30 days of move-out.
Contact us at The Wright Choice Richmond Realty Group if you’re unsure about the security deposit laws in Virginia.