What is the Security Deposit Disposition Form?

Security Deposits Disposition

As a landlord, collecting a security deposit for every property you rent is a great way to protect your assets. However, you must follow your state’s law, determine what damages are considered normal wear, and deduct the appropriate amount from your tenant’s security deposit when this person moves out.

You have the right to use the security deposit to cover pet damage and similar expenses. However, it’s also important that your tenant is properly informed about the costs you’re deducting from their deposit. To do this, you need to provide a detailed security deposit disposition form detailing all the damages you’re covering from the security deposit.

In this article, we’ll tell you everything you need to know about using a security deposit disposition form. We’ll also provide examples of charges you can deduct from the security deposit of each unit, go over steps to help you reduce wear and tear, and share tips to reduce the chances of ending up in court due to a legal issue with a tenant.

What is the Security Deposits Disposition Form?

Before going any further, let’s review the definition of a security deposit disposition form.

Also known as a security deposit deduction form, this document allows you to create a record of the expenses being deducted from your tenant’s deposit. It details the amount deducted, the reasons for covered damages, and the remaining balance due for return.

The form should also cover the expected return date of the rest of the security deposit if any remains after the repairs are completed.

The repair deduction form must contain the different costs and categories because it informs tenants what they are penalized for.

Moreover, if your tenant wants to dispute any of the costs, it’s your responsibility as their landlord to explain what repairs they are being charged for.

When You Need to Use a Security Deposit Statement Form?

Many landlords are hesitant to make deductions because they are unsure when to use a security deposit disposition form.

In simple terms, this form should be used whenever you detect damages that go beyond expected wear or normal wear and tear. So, after your tenant moves out, immediately perform an inspection and locate scuffed walls as well as other damages that are not considered normal.

Whether you manage a single property or several units, keeping track of security rental deposits and move-in condition inspections can be challenging.

A reliable property management software tool can help you manage your rental properties and security deposits while also identifying situations where it’s necessary to prepare a security deposit disposition form.

Security Deposits Disposition Form Sample

Every security deposit disposition form contains basic elements that help the tenant understand the charges the landlord deducts.

There isn’t a standard security deposit disposition form sample that can be applied in all instances. So, as an alternative, we’ll provide the most common basic elements included in a disposition letter form so that you can piece together a tailored document for your tenant or tenants.

Here are some of the elements you should always include in your security deposit disposition form.

Date and Identifying Information

For starters, your security deposit disposition form should contain the date and information that identifies the tenant, you as the landlord, and the property itself. This includes:

  • Date of completion
  • Name of the tenant
  • Name of the landlord
  • Property address
  • Tenant’s last known or forwarding address
  • Move-out date

Type of Agreement

Next, you should specify the type of agreement. You should state whether the property was a:

  • Residential lease agreement
  • Month-to-month residential lease agreement
  • Occupancy Agreement
  • Or any other type of deal

You should also specify whether a proper day written notice to vacate was given and the date the landlord was notified that the unit would become vacant.

Disposition of Security Deposit

At this point, you must explicitly outline the deductions from the tenant’s security deposit.

The first section of this part of the security deposit disposition form should state how much money the tenant paid as a guarantee.

Next, the disposition of security deposit funds. In other words, the cost breakdown and description of the deductions. This can include:

  • Repair damages
  • Cleaning of premises
  • Repair or replacement of lost furnishings
  • Other charges owed (Rent, Late Fees, Court Costs, etc.)
  • Total deductions
  • Total security deposit collected
  • Deductions exceeding normal wear and tear

Due Balances and Expected Delivery Dates

Finally, after listing every cost that will be deducted in the disposition of security deposit funds, you should also state the latest delivery date.

Be sure to include the following information:

  • Balance due to the tenant
  • Balance due to the landlord
  • Landlord signature
  • Total security deposit collected
  • Deductions exceeding normal wear and tear

What Expenses Landlords Can Deduct from the Security Deposit

There are many different expenses that you can include in your security deposit disposition form. This includes:

  • Carpet stains
  • Broken windows, locks, frames, electric outlets, and window sills
  • Excessive dirt, contaminants, and other waste left behind
  • Damage caused by pets
  • Broken furniture and appliances
  • Broken doors, damaged flooring, and wall scuffs

Security deposits considerably vary from state to state. So, you need to consider your state’s laws, regulations, and requirements before creating this type of document for your tenants.

Tips to Avoid Damages in the Future

Learning how to use a security deposit disposition form properly will help you take care of any damages that don’t fall under the conventional wear category.

But this isn’t the only step you can take to protect your property. Here are three tips you can implement immediately to help protect your rental business.

Set Expectations with Tenants

Make sure to review expectations with your tenants and provide everything they need to meet them, including additional supplies if necessary.

Create a Detailed Lease Agreement

Creating a detailed lease agreement that contains the expectations you discussed and a detailed breakdown of the property’s condition can help you keep each rental in great shape.

Keep Your Properties in Pristine Condition

Having properties in pristine condition will encourage tenants to keep them that way. Plus, all damages and issues that aren’t considered conventional wear will be easy to spot. Additionally, make sure to perform routine inspections of the property at least 2-3 a year and address any damages the tenant caused; don’t wait until they move out.

Final Thoughts

The security deposit you get from your tenants is meant to provide a safety net. But make sure to properly fill out every security deposit disposition to avoid legal troubles and complications with your tenants later on.

Stay tuned to our blog to learn more about managing your rental properties.

In this article:
Baselane Banking is now offering 4.19% APY interest

Automated and free Rent Collection, without the stress

Avatar photo
Financial Technology, Real Estate Investing, and Property Management, Accounting and Tax, Finance
Saad started his career as a Certified Public Accountant (CPA) working for a top-tier accounting firm. He was responsible for helping audit alternative investment funds. He later worked at a hedge fund where he was responsible for preparing financial statements and implementing new technology. He also ran a successful private tax practice for five years.

After completing his MBA at Duke, Saad joined The Boston Consulting Group to do management consulting. At BCG his experience spanned several industries and growth projects across Pharma, Retail, and Technology companies. His passion for democratizing finances led him to Plaid, a fintech, where he worked with large Banks and Financial Institutions to make finances and money easier for all.
Security Deposits Disposition
What is the Security Deposit Disposition Form?