Preparing a Statement of Itemized Deductions
As a landlord or property manager, the security deposit is demanded from tenants to act as insurance cover for unpaid dues or damages they leave might leave behind when it gets to the point they are vacating the premises. Regulations as to when and to refund the security deposit may vary from state to state or region to region but a 14-60 days period is constant in most places. Having the security deposit from a tenant doesn’t necessarily mean that you have to charge them for one thing or the other, but deductions have to be made if justifiable levels of damage or accrued amounts are evident.
In most cases, the refund of the balance is required to be accompanied by a list of deductions along with the respective amounts and other relevant details. To most landlords, however, preparing a statement of itemized deductions can prove to be a daunting task, especially if one is not completely sure on what to deduct and what not to. Below are some pointers to help you prepare a professional itemized deductions statement without much strain the next time one of your tenants moves out.
Before Preparing a Statement of Itemized Deductions
Before putting it down on paper, you obviously need to inspect the property for damages and filth, so as to determine what to charge for. It is important to note that while some tenants are so neat, organized and careful with their rental premises, there is another category of tenants that will leave the place all messed up in terms of condition and function. This means that the statements of itemized deductions will vary from tenant to tenant. Once you establish the damages to charge for and determine whether the tenant has any outstanding rent or utility bill amounts, then you can be more at ease when making this piece of document. Some of the common things to charge for may include but not limited to:
• Broken or chipped walls or holes excess holes
• Chipped, broken or cracked, kitchen or bathroom tiles out of misuse
• Clogged drains and Blocked toilets
• Burned or torn carpets, curtains or upholstery
• Stains on carpets, upholstery
• Broken windows, appliances, furniture and other, fixtures or utilities
• Pest infestation and extermination
• Filth and excessive garbage or dirt on premises
• Growth of mold or mildew
• And any other damage occurring from misuse or negligence.
Making the Statement – Default Details
Now that you know what you are going to charge on the security deposit, it is itemizing the deductions is your next task. In essence, the document should contain default details of the landlord and former tenant, as well as their addresses, the rental period and the date of the document as in the following example.
Date – [May 2, 2016]
From – [David Mc Doman, 458 Benita St, Peru]
To – [Jackson M Michael, 454 Benita St, Peru]
Property Address – [458 Benita St, Peru]
Rental Period – e.g. [April 22, 2014, to April 22, 2016]
Amounts Received and Deductions
The body of your itemized deductions statement should also indicate the Security Deposit amount received interest on deposit if any and the sum of these two indicated as total credit. If $1,000 was the security deposit received and the interest on deposit totaled to $100, then the total credit would be $1,100. This would then be the amount from which to apply the deductions.
Itemized Charges
This section covers any damages requiring repairs along with associated costs including labor, equipment and material. They should be listed in a non-complex manner for the tenant to easily understand.
1. Repairs:
If you established that the bathroom had a mold infestation, the toilet was blocked and that the property required a pest inspection and elimination, these should be itemized, with brief information on what was done and the total costs involved.
a. Pest Inspection And Elimination
Details: Flea infestation was detected by experts and fumigation was performed.
Total Cost: $200.
b. Toilet Plumbing
Details: Toilet was blocked. Plumbing repairs were done to unblock and restore function at a cost of $30/hr for 3.5 hours.
Total Cost: $105
c. Mold Remediation
Details: Mold Remediation Company was hired at $75 per hour for inspection and mitigation.
Total Cost: $150
2. Property Cleaning:
If excessive filth was established on the premises, then professional cleaning may be required, and this would be charged on the tenant’s security deposit. Provide details about the process and how much it cost as in the below example.
a. Cleaning:
Details: Oil spills and debris were discovered in garage and paving. Cleaning was done at $15 per hour for 6 hrs.
Total Cost: $90
3. Totals for Cleaning and Repair: $545
This gives the totals of section 1 and 2, which is literally the total amount of deductions.
4. Amounts Owed:
The amount owed to the tenant by the landlord will be given by the security deposit (together with interest) amount minus the total deductions. In this case, it will be $1100 – $545, which gives us $555. However, there is a need to include a line for amounts owed to the landlord just in case the security deposit wasn’t enough to cover the damages or other outstanding payments.
Amounts owed in our case will be:
[ ] A. Total Amount Landlord Owes Tenant = $555
[ ] B. Total Amount Tenant Owes Landlord = N/A
5. Comments:
Here, you acknowledge payment details or other comments related to the security deposit. For instance:
Please find $555 check enclosed.