Security Deposit 101 for Landlords

Residential landlords can request various fees or deposits from a potential tenant, including fees for obtaining a background check and a deposit to hold a unit. Under Washington’s residential landlord-tenant act, a residential landlord has certain duties regarding deposits. The following is an overview of deposits and information that landlords should be aware of when requesting deposits.

Difference Between Deposits and Nonrefundable Fees

Landlords often use the word fees and deposits interchangeably; however, it is important that landlords are aware that Washington law makes a distinction between a nonrefundable fee and a deposit. Any money paid to the landlord which are nonrefundable may not be considered a deposit. A nonrefundable fee is different from a deposit because a deposit is refundable, except it can be withheld under specific circumstances, such as when the tenant damages the unit.

Holding Deposit

A landlord can request a deposit to hold a unit for a potential tenant or ensure that a potential tenant will move into a unit. When the holding deposit is paid, then the landlord must immediately provide a receipt and a written statement outlining the conditions that it will be withheld. Once the potential tenant becomes a tenant and moves into the unit, the landlord must credit the holding deposit to the tenant’s first month’s rent or the tenant’s security deposit. If the potential tenant does not move into the unit, then the landlord may keep the holding deposit as long as the conditions are included in the written statement provided to the potential tenant.

Background Check Fee or Deposit

Before charging a fee or deposit for using a tenant screening service or obtaining background information on a potential tenant, landlords must provide the potential tenant with certain information prior to obtaining background information. The potential tenant must be provided notice of the types of information that will be accessed to conduct the tenant screening, the potential basis for denial of an application, and whether or not the landlord will accept a comprehensive reusable tenant screening report. If the landlord will use a consumer report, the landlord must also provide the name and address of the consumer reporting agency and advise the potential tenant of their right to obtain a free copy of the consumer report in the event of a denial or other adverse action and the right to dispute the accuracy of information appearing in the consumer report. A landlord cannot charge costs for obtaining a tenant screen report without providing the above-mentioned information.

Security Deposit

A security deposit is money paid to the landlord to ensure performance of the tenant’s obligations under the lease. The security deposit is often withheld for unpaid rent and damage caused to the unit. However, no portion of the security deposit may be withheld for normal wear and tear. When a landlord intends to withhold all or part of the deposit for damage to a unit, the written lease must specify the terms and conditions under which the security deposit may be withheld. The landlord must also obtain a checklist or statement signed and dated by the landlord and tenant describing the condition and cleanliness of the unit. Once the security deposit is received, it must be deposited into a separate rent escrow account. Within 21 days after the tenant vacates the unit or the landlord learns of tenant’s abandonment of the unit, the landlord must refund or providing a basis for retaining any of the deposit.

The information contained in this post is a general overview of deposits. If you have any questions about deposits, please contact Carmichael Clark, P.S. to talk to an experienced real estate attorney.

Esther E. Hyun, Attorney