Security deposits: how to hold, document, and return them

More small-claims cases between landlords and tenants are about security deposits than anything else, and landlords lose most of them for the same two reasons: no move-in documentation, and a return that missed the deadline. Both are entirely preventable. (Rules vary by state and city — confirm yours; this is process, not legal advice.)

Before the keys change hands

Check what your state allows you to collect. Many cap the deposit at one or two months' rent, several require it to be held in a separate account, and some require interest to be paid to the tenant. Collect the deposit in a traceable way, never cash, and record it in your books as a liability rather than income — it is money you are holding for someone else.

The move-in inspection is the whole case

Walk the unit with the tenant before they move a single box in. Use a written condition checklist, room by room, and photograph everything: walls, floors, appliances, counters, tub, window screens, and every existing scuff or stain. Timestamped photos plus a checklist both parties signed will settle almost any future disagreement in about thirty seconds.

Store the photos and the signed checklist where you will still find them three years from now — not only on the phone you will replace next spring.

Normal wear and tear versus damage

The line is roughly: wear is what happens when someone lives there carefully; damage is what happens when they do not. Faded paint, minor carpet traffic patterns, small nail holes and worn door handles are wear, and you cannot charge for them. A cracked countertop, a hole in drywall, pet urine in the subfloor and a missing door are damage.

Charges also have to account for the age of the item. Carpet has a useful life; if it was eight years old and rated for ten, you cannot bill a tenant for a brand-new replacement. Depreciate the claim.

The return deadline is not flexible

Most states give landlords somewhere between 14 and 45 days after move-out to return the deposit with an itemized statement of any deductions. Miss it and many states penalize you with two or three times the deposit regardless of how legitimate your deductions were. Put the deadline on your calendar the day the tenant gives notice.

The statement should list each deduction, the amount, and ideally the receipt or estimate behind it, alongside the move-out photos. Send it with the remaining balance by a method you can prove.

Keep it all in one place

Deposits, lease dates, move-in photos and the receipts behind deductions tend to live in four different places, which is exactly why they go missing. PLINTH keeps the lease, the deposit amount, documents and the rent ledger attached to the property — and tells you when a move-out is coming, which is the deadline people actually miss. It is $7 a month.