How Security Deposits should work. rhino!UP for October 17, 2021
KB writes: "I currently have a landlord who's been aware of broken items in my apartment for over a year but has yet to fix them. They bought the building last year. I am moving next month because I have to ask for them to cut the grass and the building has received 2 notices to shut off electricity within the last 3 months. My question is can they hold my security deposit? I am current on everything." Here are the basics.
A security deposit is the tenant's money which the tenant gives to the landlord to "secure the tenant's performance" under the rental agreement.
The Landlord is responsible to return the tenant's money no more than 30 days after the tenant has done all of the following:
terminated the tenancy,
given up occupancy (moved and turned in the keys), and
left a written forwarding address where the refund should be sent.
If the landlord decides to withhold any portion of the security deposit, the landlord must provide a written itemized accounting of what was withheld.
If a tenant disagrees with the deduction, tenant may sue in Small Claims Court. If the tenant provided a written forwarding address, the tenant may claim double the amount that was wrongfully withheld.
Back to KD's question. One of two scenarios applies in her case. If KD is renting month-to-month, she could terminate the rental agreement under ORC 5321.17 by giving a 30 days notice on or before the rental due date. However, if KD is covered by a year lease with the old owner, she must follow the procedure in ORC 5321.07 which requires that she give a "notice to correct" a problem that materially affects health and safety. If KD has copies of her complaint letters, she may have already opened the door to terminate the lease.
In an article this month in Shelterforce, Brandon Duong takes up the challenge of security deposits: Landlords Don’t Have to Control Security Deposits. Mr. Duong and Alex Williamson interviewed Steve Harriott, CEO of the Tenancy Deposit Scheme in the United Kingdom. The Tenancy Deposit Scheme works like this: "whenever a landlord takes a security deposit from a tenant, it has to be registered in a government-authorized scheme. And what that means is that the landlord has to register it with us. It’s a guarantee for the tenant that if the landlord unreasonably withholds the deposit at the end of the tenancy, we make sure they get it back." Tenants who don't receive a refund from the landlord, can apply to the TDS for the refund. TDS will refund the money and sue the landlord to recover the payment if it's not already on deposit with the TDS. When a landlord claims they suffered a damage, TDS provides a free alternative dispute resolution service to settle the dispute. No court action required.
This is probably too much government "interference" for most US citizens, but the idea of using a 3rd party security deposit system could be adaptable to many types of housing in the US. Creating a two-party deposit account at a local credit union would require that the landlord and tenant come to an agreement in order to close the account. Interest on the account could pay for the bank fees.
But why stop there? A housing provider which pooled security deposits into an interest bearing account could then reinvest the interest into low interest loans to support household stability as an alternative to using a payday lender.
Want to build a real rental "community"? Owners could pay a portion of the accrued interest as a holiday bonus to tenants. Or the owner could create a community improvement fund, where tenants can apply for grants to make the property more like home? Planting, lighting, and social events could enhance the value of the building or development.
A RHINO mentor, Robert (Woody) Widrow, is fond of calling security deposits "the landlord free loan program." As the US increasingly moves towards being a renter nation, it's time to start thinking about how innovative grassroots solutions to this basic issue of equity can build stronger families.