Security Deposits, Normal Wear and Tear, and Deductions

As a real estate attorney, I often get calls from landlords and tenants about security deposits on move-out. From what I can tell, it is the most disputed aspect of any lease. The following is a typical story. The tenant resides in the premises for a year or two. Upon move-out, the tenant broom-cleans the premises, provides a forwarding address, and requests the security deposit. Somewhere around the thirtieth day following move-out, the tenant receives a letter from the landlord detailing how the security deposit was applied to make certain repairs and clean the premises. Sometimes the landlord returns a check with the accounting. Sometimes the landlord sends a bill with the accounting. It depends on whether the repairs and cleaning exceed the deposit. The tenant receives the accounting and is upset by the deductions.

Unable to convince the landlord to return the entire security deposit, the tenant contacts an attorney to ask whether s/he has any recourse. The attorney listens to the tenant’s story, reviews the accounting letter provided by the landlord, and hopefully has the opportunity to review the lease and move-in condition form. If the attorney is really lucky, the tenant has also provided both move-in and move-out pictures.

The attorney sends a letter to the landlord describing why the accounting is hogwash and demands the tenant’s security deposit be returned. The landlord then hires an attorney to communicate with the tenant because the damage from an unreasonably withheld security deposit is three times the amount unreasonably withheld, which may be a good deal of money. The landlord’s attorney reviews the same documents as the tenant’s attorney, although the landlord usually has more to offer.  Thereafter, the landlord’s attorney and the tenant’s attorney begin discussing what items, if any, were appropriate to withhold from the security deposit.

Landlords cannot deduct items for normal wear and tear. It is this issue that is most prime for debate between the two attorneys. Of course, not even the attorneys know for certain what normal wear and tear means in specific instances. The definition of “normal wear and tear” provided by the Texas statutes states as follows:

“Normal wear and tear” means deterioration that results from the intended use of a dwelling, including, for the purposes of Subchapters B and D, breakage or malfunction due to age or deteriorated condition, but the term does not include deterioration that results from negligence, carelessness, accident, or abuse of the premises, equipment, or chattels by the tenant, by a member of the tenant’s household, or by a guest or invitee of the tenant.” Tex. Prop. Code §92.001(4).

If I may put it more simply, normal wear and tear is what occurs if a reasonable person was living in the premises. Unfortunately, we have very little idea of what a judge will rule as “normal wear and tear.” I will try to give a few examples on either side, but keep in mind that the below list is both incomplete and indeterminative. Not all judges agree. Even then, judges may rule differently depending on circumstances.

Carpet

Carpet is the most frequent item that appears on accounting letters I receive. Using the normal wear and tear definition, landlords should not be able to replace all carpet once a tenant leaves. If a carpet is ten years old and worn, the last tenant should not be stuck with the bill to replace it unless the tenant destroyed it. Alternatively, though, if a tenant receives the premises with fairly new carpet, the carpet should look pretty nice after living there only one or two years. Any stains and rips would most likely be deductible. Further, the landlord cannot use the carpet replacement as an opportunity to upgrade at the cost of the tenant.

Paint and Walls

Paint and walls is another item that frequently appears on security deposit accountings. Landlords must expect tenants to make their house their home. Pictures will be hung. Drapes will be mounted. Paint will be scratched. Baseboards will get smudges. Smaller holes used for decoration (nail holes/screw holes) in most instances, should be considered normal wear and tear. Similarly, a couple of scratches and smudges are expected. However, larger holes in the sheetrock (like a foot or fist), long continuing marks along walls (like a crayon), and mismatched repairs is not normal. The landlord would mostly likely be able to deduct those types of things. Again,though, the landlord doesn’t have the right to upgrade or take the opportunity to repaint the entire house.

Equipment

Air conditioners, furnaces, refrigerators, washers and dryers, dishwashers, stoves, ovens, and microwaves age. After several years, they simply must be replaced. From what I can tell, they no longer make the hardy GE or Whirpool units that grandmothers have used since their wedding day. Unless the tenant has literally caused the damage through action or neglect, it is the landlord’s responsibility to replace these items when they die or are otherwise on the verge of death. One exception may include whether a tenant failed to replace the air filters for the air conditioners. Beyond that, though, replacing equipment is almost always going to be the landlord’s responsibility.

Roof

Roofs are almost always going to be the landlord’s responsibility to replace or repair. A rare exception may exist when the tenant mounts something to the roof (satellite dish) that causes the damage.

Foundation and Yard

Repairs to the foundations and yards are tricky to resolve and they are becoming trickier. For residential homes, many leases require the tenant to sufficiently water the yard and foundation. North Texas is not blessed with the best soil and it is made ever more complicated by the drought. Many municipalities, such as Frisco, have imposed watering restrictions. This complicates the liability for yards and foundations. Tenants may still be able to use the foundation sprinklers and possibly even hand water, but the amount of water being received by the foundation and the yard is much less than what it would normally receive. Therefore, bushes and shrubs are probably the only safe refuge for a landlord to deduct any portion of security deposit. They typically require less water, and the water can be focused so as to make sure they receive a sufficient amount. The liability for the remaining yard and foundation, though, is entirely unknown and incredibly fact dependent. Further, those facts are most difficult to prove by the landlord.

Accounting for security deposits is obviously a tricky venture. Most landlords can push the mark without any fuss. If an item for which a portion of the security deposit is withheld is deemed incorrect, it does not necessarily rise to the level of unreasonableness or “bad faith” and therefore the only harm caused to the landlord was an accounting and attorneys fees (which probably actually exceeds the security deposit). However, landlords should be cautious. Many landlords have the idea that the premises should be returned to its pre-existing condition. That is an incorrect assumption, though. The premises merely must be returned to a condition that is reasonable given the amount of time that a tenant resided in the premises. If a landlord has a question about whether an item should be deducted from a security deposit, then s/he should contact an attorney. Similarly, if a tenant questions an item that was deducted from the security deposit, then s/he should contact an attorney.

Robert Newton is an attorney based in Frisco, Texas that practices real estate law, business law, estate planning, and probate.