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Security deposit receipt template for Security

hi I'm Mark hunningham with Grace Property Management we've worked with thousands of Real Estate Investors here in Colorado over the last several decades let me share with you the six biggest mistakes we've seen Real Estate Investors landlords make when they're doing the security deposit return to a tenant moving out of a property legally it's called a security deposit disposition where they decide okay are is there damage that needs to be withheld is any money withheld from the tenants deposit and I'm going to retain that as the landlord and how much am I going to return to my ex tenant has to be done every time a tenant moves out of a property the six biggest mistakes that we see landlords make number one is taking too long did you know that in Colorado there is a law that specifically states that you as as a real estate investor as a landlord you have 30 days from the time the tenant vacates to refund the tenant security deposit or up to 60 days if your lease specifically says you have 60 days so if your lease is silent on that issue you only have 30 days if your lease gives you up to 60 then you can take the full 60 now this is important because if you pass that am that timeline you automatically forfeit any right to retain the tenant security deposit and you are potentially liable for treble the amount to be refunded to the tenant so it's very important that you make sure the time is proper in how quickly you're processing the security deposit and getting it back to your vacated tenant number two mistake we see is confusing wear and tear versus damage now this can be tricky there is a law in Colorado that clearly defines what damage is and what wear and tear is we have done a longer post and I'll link to it in this post on understanding the definition of wear and tear understanding the legal distinction and the difference between something that should be considered wear and tear meaning you cannot charge that thing to the tenants deposit or damage which you could charge a hole in the wall that would be damag tack holes in the wall that would be wear and tear if things wear out and break over time because it's not not because of negligence then you cannot charge that to the tenant security deposit this is important because if you charge this and you're found to violate this just like on the timeline you as the landlord are now responsible for treble the amount of the return to your vacating tenants so it's very important to understand and again we'll link to this to make sure that you have a clearer understanding of what is wear and tear and versus what is damage number three saying that a deposit is non-refundable this often comes into place for example if you as a landlord allow pets and you say okay Mr tenant uh you're going to pay a non-refundable deposit of $100 to have your dog the word non-refundable deposit is an oxymoron it doesn't exist a deposit legally a deposit by definition is refundable so there's no such thing under the law as a nonrefundable deposit all deposits are by definition refundable so if you called something a non-refundable deposit well you tripped yourself up and you're going to have to refund that to the tenant you cannot retain that for any reason if you use the word deposit in the definition hopefully that makes sense kind of a technical thing there but it's important to understand that distinction number four just forgetting to check that final utility bill most utilities are built in AAR in Colorado so the water bill for example if you own a single family property and the tenant moves out and they left the property in great condition and you're going to refund their full deposit well make sure you call the utility company and get that final water bill because that's not going to be build for a whole month usually until after the tenant has vacated and you don't want to refund all that only to find out the tenant had a $100 outstanding water bill that you should have withheld from their deposit so that you as the landlord as the property owner could pay that bill so be sure that you're tracking utilities closely number five is overcharging for your time involved in bringing the property back to rent ready condition so let's pretend a tenant moves out of your property and it looks pretty good but you have to go in and you have to paint a wall where their child took some crayons and rote all over it and so you go in and you repaint the wall and you charge the tenant for the repainting of the wall now what can you charge the tenant well you can charge them for the paint you can charge them for the material what you can't charge them for is the time your time that it took to repaint the wall now if you hire a contractor to go in and repaint the that wall that entire expense could be charged to the tenants security deposit but if you as the landlord if you as the property owner say well I'll just go paint it myself and I'll build the tenant for my time you typically cannot do that in Colorado your time is not back billable to the tenant for work you did to bring the property back to rent ready condition so if you have to go mow the lawn because they didn't mow it when they moved out and it looks terrible yeah you could charge them technically for the gas but you can't really charge them for your time of you being out there pushing the mower now that may sound unfair but that's the way Colorado law typically works there are some exceptions as with there are with everything but most of the of the time you can't charge for your time and then the last thing number six is this make you as the landlord not understanding the life expectancy of an item so let's pretend that your tenants moved into a property at the time they moved in the carpet was 5 years old it was in good condition but it was 5 years old that tenant there lived there for another 5 years and they moved out of the property and they destroyed the carpet they they damaged the carpet Beyond wear and tear they had holes in the carpet they they poured grease on the carpet they damaged the carpet can you charge that ex-tenant the vacating tenant for the replacement cost of the carpet well it was 5 years old when they moved in they were there another 5 years that carpet now has exceeded its life expectancy carpets don't have a life expectancy in rentals properties of more than 10 years so to be technical you probably in most situations should not be charging anything to the tenant for the carpet now the the property owner may say but that doesn't make any sense that they destroyed the carpet they ruined the carpet yes they did however the life expectancy of the carpet had been exceeded and therefore it doesn't matter if they destroyed it or not it has its life expectancy is is passed so whether they put a hole in the carpet or whether they left the carpet beautiful or whether they burned it doesn't matter you probably do not have a legal right to charge them for damage to that because of the life expectancy and every thing in the property has a different life expectancy carpet paint the appliances the blinds everything's going to have a different life expectancy we have a life expectancy formula that we use and we have different life expectancy valuations so that way if a tenant moves in and the carpet's brand new and they're there for 4 years and they destroy the carpet you can charge them for a portion a percentage of the replacement of that carpet based upon the life expectancy how many years it was there how many years you have left so a little bit complicated but that's just the way it works in the world of property management here in Colorado if you're a client an owner client of Grace Property Management don't worry we do all of those things for you as part of all our full service property management process if you're not one of our clients and we can be a resource feel free to jump on our website rent grace.com you'll find a lot of resources out there until next time I wish you [Music] success