Security deposits are tricky, especially in Portland, where there are several state and local laws surrounding these deposits that you need to follow. How can you be sure you won’t find yourself embroiled in a security deposit dispute with your Portland tenants who have moved out?
The best way to avoid any conflicts with your residents is by understanding the details of Oregon’s security deposit laws and documenting the condition of your rental home before and after the tenancy.
It’s also important to conduct a thorough and well-documented move-in and move-out inspection. Open communication with your tenants will lead to better tenant relationships and a lower risk of disputes.
Here’s our best Portland property management advice when it comes to avoiding security deposit disputes with your residents.
Know the Portland Security Deposit Laws
A security deposit is an amount of money that a Portland resident gives to a landlord in case the tenant owes the landlord money later on. Landlords are free to require deposits in any amount unless you are also requiring the last month’s rent to be paid before move-in.
In Oregon, all deposits are refundable. Security deposit laws changed a few years ago, and there are now some specific requirements that must be met, otherwise, your tenant can take you to court and you’ll find yourself facing large punitive damages. Here’s what you need to know about the security deposit laws in Portland and in Oregon, and how you can avoid falling out of compliance:
You must allow your tenants to pay the security deposit in three-month installments if they request it.
Provide your tenant with a move-in condition report when the lease is signed and the tenancy begins. Your tenant has seven days to identify any damage or imperfections in the property that are not listed on the condition report.
You’ll have to put the tenant’s security deposit into an account that is not your personal account within two weeks of receiving it.
At the end of the lease term, you must walk through the property with your tenant within a week of move-out to note any damage for which the tenant will be responsible. After the tenant has vacated, you’ll need to provide an itemized list of any deductions you’ve made to the deposit and send it to the tenant with any deposit money that remains within 31 days of move-out.
Provide your tenant with a Rental History Form, which reflects rental payment history.
Pay attention to these timelines and requirements to avoid any disputes, lawsuits, or claims. Remember that setting clear and consistent expectations early in the lease period can help you establish a better relationship and potentially avoid disputes later on.
Talk to your tenant about what you’ll expect the property to look like when they move out. Include this information in your lease agreement, and when notice is given from either party that the tenancy will end, be sure to reiterate those expectations. Provide a list of things that the tenant needs to do to get the full security deposit back. This will give them plenty of time to return the property to the same condition it was in when they took possession.
Document Condition with Inspection Reports
Documentation is pretty important when you’re moving a tenant in and moving a tenant out.
This is a legal requirement, as you can see from the above bullet points we provided. Before a tenant moves into the property, do a thorough walk-through and a move-in inspection report. Provide that report to your tenant, and when both of you sign off on that inspection report, you’re agreeing to how the property looks. You can use that same inspection form during the move-out, and then compare the condition at each time.
You want the property returned in the same condition it was when your tenants moved in, except for the normal and expected wear and tear. Your residents should understand this.
Pictures are an important supplement to the inspection report and are excellent to include. When you can document the condition of your property with pictures, you’ll be able to prove that there was damage or changes to the property during the lease period.
Along with setting clear expectations at the start and end of the tenancy, you also want to give tenants an opportunity to remediate and address any conditions before they move out. Give them notice so they know what types of things you will deduct when you’re reviewing the security deposit return.
In Oregon, you’re required to do a pre-move-out walk-through with your tenants so you can point out any deductions that they may be subjected to. Mutually coordinate a time to walk through the property together, and then itemize any issues you see so the tenants have the information they need. They have an opportunity to cure the problem before leaving. There will be fewer surprises when and if deductions are made.
Reasons to Charge a Portland Tenant’s Security Deposit
You need to understand what’s appropriate for security deposit deductions. Landlords can withhold security deposit for:
Unpaid rent
Repairs to the property for damages
Cleaning that’s required to bring the property back to the level of cleanliness it was in when the home was rented out
You cannot charge the security deposit for general wear and tear that happens to every property, regardless of who is living in it. Those small nail holes and the scuff marks from the furniture are for you to repair.
This is often the most common reason for security deposit disputes. Tenants rarely believe that they’ve damaged anything on the property. They will almost always claim it’s normal wear and tear, or try to tell you “it looked like that when I moved in.”
Often, a landlord and tenant cannot agree on what is considered normal wear and tear (the responsibility of the landlord) and what is considered damage (the responsibility of the departing tenant). Do not mistake normal wear and tear for damage. It’s not worth your time and risk to be hauled into court because you’re arguing with a tenant over a $100 charge to the deposit.
This can be a somewhat subjective area, and it will often come down to reviewing the property condition at the beginning of the lease term and the end of the lease term. If the screen door was off its hinges when a tenant moved in, you cannot charge the deposit to replace that door. But if a tenant’s toddler used crayons and markers on a wall or a floor, you can charge the deposit to repaint or clean the carpets.
Document the Deductions Made from Portland Security Deposits
Another thing that’s critical to avoiding disputes is the documentation of any money you spend on the cleaning or repair of your property after a tenant moves out.
If you do have to do some work after a resident leaves and you’re going to charge the security deposit, make sure you can provide the necessary invoices and appropriate bills and receipts to back up those charges. This will go along with the security deposit accounting statement to the resident who has moved out. Be clear about the deductions you’ve made and the balance that the resident is getting back, and have supporting documents to match.
Do not miss the 31-day deadline. You have to return any deposit that’s left over to the tenant’s last known address (always get a forwarding address when tenants leave). If you miss the deadline, the tenant can file a claim against you, and the courts could require you to return the entire deposit plus punitive damage of up to three times the amount of that deposit.
Managing Security Deposit Disputes
As hard as you might work to avoid security deposit disputes, you could find yourself with an angry tenant who believes you have unjustly charged the deposit.
If you are in a security deposit dispute, there are a few things you can do to resolve it. Do your best to talk to your former tenants and reach an informal settlement. If you can’t resolve things, your case may end up in a small claims lawsuit or a hearing; local rules decide how the dispute or the claim is handled.
Always double-check the charges you made. Determine whether you made appropriate deductions or if they were overreaching in terms of property condition when you initially leased it. Review whether you complied with all statutory regulations. If you didn’t, it will be very hard to defend yourself in court. For example, if you didn’t provide an itemization within the requisite time period, you’ll probably have a losing case even if you were justified in what you deducted.
We work with security deposit issues on behalf of landlords and investors, and we have a lot of experience collecting, holding, and returning them. If you have any questions about what you should do when it’s time to manage your tenant’s security deposit, we can help. Contact us at PropM, Inc. We are available seven days a week to answer questions and offer assistance.
