What Is a Disposition Letter from a Landlord? Understanding the Fundamentals

By using the security deposit disposition form after tenants vacate your property, you can avoid headaches and make financial reconciliation smooth sailing. Learn how this document helps justify deductions, resolves confusion, and prevents disagreements over damages by providing renters clear accounting and closure.

By
Nichole Stohler
|
Last Updated
February 12, 2024
What Is a Disposition Letter from a Landlord? Understanding the Fundamentals

As a landlord, returning a tenant's security deposit after they move out is a task you're inevitably very familiar with. This task involves inspecting the unit, assessing any damages or charges, and deciding what security deposit amount to refund the tenant. While this part of the process is straightforward, the next part tends not to be: how do you communicate these deductions clearly to avoid disputes?

That's where the security deposit disposition letter comes in. This detailed notice explains to the tenant how you have handled their security deposit, including the original amount, any deductions you made, fees charged, and the final amount you'll return.

Here, we'll go over everything landlords need to know about security deposit disposition letters. You'll learn what details you should include, how to handle tenant disagreements, and tips for making the process go smoothly for all parties.

Defining the disposition letter

The main purpose of the disposition letter is to create a record of the rental unit's condition when the tenant moves out. It also provides an accounting to the tenant of the security deposit funds — detailing the original payment amount, the deductions you made, and the amount you will return. This helps avoid future disputes over the security deposit.

A security deposit disposition letter or security deposit deduction form is a detailed notice you provide to the tenant upon termination of a lease. This letter documents the move-out inspection, itemizes any deductions from the security deposit you are making, and specifies the deposit amount you will return to the tenant.

When is a disposition letter sent?

In most states, landlords must send the disposition letter and any security deposit refund within a certain timeframe after the tenant has moved out. Common deadlines are 14, 21, or 30 days after the tenant has vacated the property and returned the keys.

For example, landlords in California have 21 calendar days to return the security deposit balance and an itemized statement of any deductions to the tenant. Other states have similar statutory deadlines landlords must adhere to.

Landlords should be aware of and comply with their state's specific security deposit laws. Failure to send the disposition letter on time could result in penalties. Sending it promptly can help avoid claims or lawsuits from tenants.

Allowable deductions from the security deposit

As a landlord, you may legally deduct charges from a tenant's security deposit for a limited number of reasons, as outlined in the lease agreement. Typical allowable deductions you can make include:

  • Repairs beyond normal wear and tear: This includes holes in walls, carpet stains, or burns that require replacement. It also covers missing or broken appliances like garbage disposals or built-in microwaves that need replacing. Essentially, any physical damage like minor scuff marks or gentle aging that occurs with ordinary use qualifies as normal wear and tear.
  • Deep cleaning: This includes professional carpet cleaning services to treat heavy stains or pet odors, cleaning grease buildup in the kitchen, removing mold/mildew in bathrooms, and wiping down dirty walls/baseboards. It cannot also include move-out cleaning costs to declutter large amounts of trash and belongings left behind by the tenant. However, standard cleaning tasks between tenants like vacuuming, dusting, and mopping are part of your basic responsibilities as the landlord.
  • Unpaid rent or utilities: Landlords can also deduct unpaid utility bills, such as water, sewer, and trash if they were the tenant's responsibility per the lease.
  • Late fees: If the tenant habitually paid rent late according to the grace periods outlined in the lease, the landlord may deduct associated late penalty fees from the security deposit.
  • Removal or storage of abandoned property: If the tenant leaves any belongings behind after moving out, the landlord can remove and store them, passing on the costs. This includes hiring cleaning crews or junk removal services to discard trash and possessions. Landlords can also deduct storage rental fees.
  • Rekeying locks: You may deduct a fee to rekey the locks if the tenant fails to return all keys at the end of the lease.

Details to include in the security deposit disposition letter

The disposition letter should contain certain details that document the status of the rental property and the security deposit accounting details. Standard items to include are:

1. Date and address

As a landlord, you should date the disposition letter on the day you mail or deliver it to the tenant. This date documents when you sent the security deposit accounting.

Be sure to include the tenant's current forwarding address, as this is where you will send the letter and any refunded portion of the security deposit. You'll need the tenant's most up-to-date contact information so you can properly deliver their security deposit disposition.

2. Identification of rental property

Clearly state the rental property address, unit number, or apartment name/number. This allows the tenant to easily identify which unit the security deposit disposition is for. Both parties need to confirm the exact rental unit it involves.

3. Name(s) of tenant(s)

List the full legal names of all tenants to whom the disposition letter applies; generally, this involves listing all adult residents who have signed the rental agreement. Be sure that anyone who is entitled to notification receives a copy of the letter.

4. Original security deposit amount and date received

State the total security deposit amount the tenant originally paid when starting the lease. Also provide the date you received the full deposit amount from them, as this serves as proof the tenant paid on time.

5. Description of move-out inspection

The landlord should detail the move-out inspection, including the date, time, and names of all attendees. Note if the tenant was present or declined to participate.

Describe the rental unit's general cleanliness and condition as observed during the walk-through. Be as objective and detailed as possible.

6. Itemization of any security deposit deductions

This section is the main focus of the disposition letter. As the landlord, here is the place to list out any amounts you are deducting from the security deposit.

This may include damages, cleaning fees, unpaid rent, removal of abandoned property, or other fees owed by the tenant. Break it down into an itemized list.

For each separate deduction, the landlord should:

  • Provide a detailed description of any damages or deficiencies noted. Specify the rooms, items, or areas of the unit affected.
  • List related costs for repairs, replacements, cleaning, removal, or other charges. Include copies of any invoices, vendor estimates or other documentation showing rates.
  • Explain why the tenant is responsible for these costs according to the terms of the lease.

7. Total security deposit amount returned to the tenant

Calculate the total security deposit amount minus all your deductions. Clearly state the remaining amount you will return to the tenant after deducting fees, and explain how you reached that final amount.

8. Signature of landlord or agent

The landlord or an authorized representative should sign and date the disposition letter. Print the name and title of the signer, along with full contact details for the landlord or property management company.

Security deposit disposition sample letter

[Date]

[Tenant Name]

[Tenant Address]

Security Deposit Disposition for [Property Address and Unit Number]

Dear [Tenant Name],

This letter is to provide you with an accounting of your security deposit for the property at [Property Address and Unit Number] that you rented from [Move-In Date] to [Move-Out Date].

Per our lease agreement, your security deposit of $[Deposit Amount] was to cover any damages beyond normal wear and tear. On [Date] at [Time], I conducted a move-out inspection of the rental unit in your presence. Overall, I found the unit in [Condition], except for the items noted below.

Here's the detailed breakdown of the deductions that need to be made from your $[Deposit Amount] deposit:

  • $[Amount] to [Repair/Replace] [Item] that [Damage/Deficiency Noted] exceeds normal wear and tear. [Attach documentation].

After deducting the above $[Total Deductions] for repairs and replacements, your remaining security deposit due back to you is $[Remaining Deposit]. Please find a check for $[Remaining Deposit] enclosed.

If you have any questions or concerns regarding these deductions, please contact me immediately so we can resolve any issues. Thank you for renting from us over the past [Duration of Tenancy]. I hope you enjoyed your time in the apartment. Best of luck at your new residence!

Sincerely,

[Landlord Name]

[Landlord Title]

[Landlord Company]

[Landlord Contact Info]

Receiving and disputing the security deposit disposition form

Once the tenant receives the security deposit disposition form, they have the right to dispute any deductions or amounts not returned. There is usually a timeframe for doing so, as spelled out by state law — often 10-30 days from receipt of the letter.

Suppose the tenant believes the landlord took unwarranted deductions from the security deposit. In that case, they can contest this by sending the landlord a letter to explain their reasons for disputing each item.

Supporting documentation like photos or invoices can be helpful. State laws typically require the landlord to provide proof of all expenses and damages they claim against security deposits. The landlord usually must refund the contested amount if the tenant's dispute is valid.

Refusing to return disputed portions without sufficient evidence or ignoring the tenant's notice of dispute can expose the landlord to significant penalties.

Tips for avoiding security deposit disputes

Landlords can take proactive steps to avoid disagreements over security deposits to make sure the process goes smoothly:

Conduct detailed move-in and move-out inspections

When a tenant first moves into the unit, the landlord should conduct a detailed move-in inspection, noting any existing defects, damages, or general condition issues on a comprehensive checklist. All aspects of the property should be reviewed, including walls, floors, appliances, fixtures, and outdoor areas. The landlord and tenant should be present to walk through the unit together, test appliances, plumbing, and lights, and sign off on the completed report.

This provides a record of the baseline condition. The same process should occur at move-out, comparing any changes or new damages against the original inspection. Having documentation from both parties makes it hard for tenants to dispute pre-existing defects.

Properly document damages

If damages are identified during the move-out inspection, the landlord needs to provide thorough documentation to validate deduction claims. For any stains, holes, or other issues, take multiple clear photographs showing the problem areas and surrounding context.

Get written repair estimates from vendors detailing their professional assessment of issues. All documentation should have date stamps for timeline reference. Detailed validation of deductions will often prevent tenants from disputing repair costs.

Use fair and accurate cost estimates

When deducting charges for repairs and replacements, landlords should use reasonable rates and discretion. For example, completely replacing a well-worn carpet that is five years old with brand new carpeting is typically excessive — steam cleaning and spot treatment are more appropriate.

Labor and supply costs should align with market rates. Standard cleaning fees should be realistically based on the unit's size and condition. Tenants are less likely to argue deductions they perceive as fair and equitable.

Communicate in a timely manner

Notifying the tenant of security deposit disposition promptly and in the legally required timeline prevents miscommunications. Discussing any potential move-out charges for excessive filth or damage with the tenant soon after the inspection can clarify expectations before deductions.

Promptly responding to objections and having a reasoned justification for each charge can also minimize disputes.

Disposition letter from landlord

A detailed disposition letter is a key part of the rental process. For landlords, it creates a paper trail showing the lawful use of the tenant's security deposit funds. When you provide the security deposit disposition letter with all supporting evidence, it can help prevent accusations of wrongful deductions.

The letter provides critical documentation that tenants who wish to dispute security deposit withholdings in court need. It also lets them know what portion they can expect returned at the end of the lease term.

Clear communication, diligent record-keeping, and fair treatment of tenants enable landlords to handle security deposit disposition to the satisfaction of both parties. Following state law and best practices around security deposits makes for far fewer headaches and disagreements. A properly executed security deposit disposition notice demonstrates the landlord's good faith and professionalism.

Disposition letter from landlord FAQs

Is it illegal to not send a disposition letter at all?

Yes, it is illegal for a landlord not to send a security deposit disposition letter. By law, landlords must provide tenants with a notice informing them about their security deposit. Without proper written notice, the landlord forfeits the right to withhold any security deposit money. Tenants can then sue or take landlords to small claims court to retrieve the full amount.

What if a tenant doesn't receive their disposition letter?

If a tenant doesn't receive their security deposit disposition notice, the landlord should send it again by certified mail so that there's proof of mailing and delivery. The landlord can also post a notice on the tenant's door as an extra precaution.

What if the landlord sells the property before sending a disposition?

If the landlord sells the property before sending a security deposit disposition notice, the new owner is responsible for providing proper notice. The new owner must send the tenant a disposition letter by certified mail within 30 days of acquiring the rental property. This ensures that the tenant receives proper notification of the change in ownership.

Nichole Stohler

Nichole co-founded Gateway Private Equity Group, with a history of investments in single-family and multi-family properties, and now a specialization in hotel real estate investments. She is also the creator of NicsGuide.com, a blog dedicated to real estate investing.

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