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Security Deposit Do’s and Don’ts

Man with a piggy bank in the form of a jar with money inside and a cute cat

When it comes to security deposit charges, there are do’s and don’ts. Greater Wisconsin’s landlord-tenant laws state that there is no limit on what you can charge for the security deposit. All you need to do is return it within 21 days after the vacancy. Within that law, you may wonder what portion of the deposit you can retain in the event of a tenant’s poor treatment of your property. We’ve provided an overview of Wisconsin’s security deposit laws below.

When To Deduct From the Security Deposit

Person Holding Final Notice Invoice In EnvelopeWhen your tenant vacates your rental property, you’re legally obligated to refund the entire security deposit or provide the tenant an itemized statement citing the amount that will be withheld and why. Here are common justifiable causes for withholding security deposits in Milwaukee County:

  • Excessive damage that jeopardizes the property value: This includes major repairs or ones that should have been dealt with prior to move-out, such as broken windows and clogged showers.
  • Unpaid rent: This is only if it was not withheld for your failure to reply to maintenance concerns. If a tenant abandons the unit, you can withhold the deposit to cover a certain amount, then sue them for any leftover balance. Start the process immediately.
  • Unpaid utilities.
  • Replacing the tenant’s property: This could include small items, such as keys.

The deposit doesn’t have to come from carelessness or abuse of the property. In Wisconsin, you can file for Nonstandard Rental Provisions outside of the reasons listed above. For example, a portion can be withheld for cleaning the rental property after move-out. As long as you document these provisions and the tenant agrees to them during the leasing process (before move-in), you can withhold the deposit.

When You Can’t Withhold the Security Deposit

Wisconsin tenants have their own set of rights, so improper handling of their security deposit can land you in court. Here are the reasons you cannot withhold your tenant’s security deposit:

  • Using the deposit to repair the damage prior to the tenancy
  • Using the deposit for routine maintenance, otherwise known as “normal wear and tear” (see below)
  • Using the deposit for cleaning services to restore the unit to a better condition than when it was transferred to the tenant

Normal Wear and Tear vs. Damage

A tiny Boston terrier puppy chews a hole in the bathroom doorIn general terms, “normal wear and tear” suggests you shouldn’t use a security deposit to pay for everyday disrepair that will come with the building’s age. Think of it as fading walls and fraying carpets vs. your tenant punching or painting those walls, staining those carpets, or building up so much trash that it leads to pests. Lease violations such as smoking indoors, evidence of undocumented pets, and misused appliances, are also damages that give legal cause for withholding a deposit.

In other words, if the tenant didn’t intentionally neglect the property by failing to report a maintenance issue, or they didn’t physically cause the damage themselves, standard maintenance should come out of your budget, not theirs. They shouldn’t be punished for using the property as intended.

You can be penalized up to three times the amount of the deposit if you unjustly withhold any amount of it. If the tenant can prove they didn’t cause damage that you’re using their money to fix, they can take a small claims case to the state. In Wisconsin, this can cost you up to $10,000.

How to Legally Withhold and Return a Deposit

Wisconsin doesn’t have laws governing where you store the security deposit once you’ve collected it. For example, you don’t have to put it in a specific business account. However, there are rules surrounding the deposit’s return. For a rightful claim to the security deposit on your rental property, Wisconsin asks that you do the following:

  • Outline all possibilities for withholding the deposit in the tenant’s rental agreement, which they will acknowledge and sign. This should include notifying the tenant of their utility responsibilities.
  • Notify the tenant that they are entitled to an initial walk-through. Within 30 days of move-in, provide a copy of any documented damages to the tenant. Clarify any repairs you know are needed. A walk-through inspection isn’t required for Wisconsin rental units after vacancy, but it’s wise to have a tenant join you for a condition comparison.
  • Document receipt of the security deposit.
  • After move-out, take plenty of high-quality pictures of the damages you want to repair.
  • Provide the tenant with an itemized list of the deductions before you return the deposit.
  • Honor the state’s deposit return timeline of 21 days.

Mature smalll business owners calculating finance bills of their activityNo matter your reasoning for withholding a security deposit, you always have to substantiate your claims with evidence. Keep receipts for the repairs or debts that the security deposit will cover. You can also hire a property manager to help you to settle disputes over monetary claims. Real Property Management Greater Milwaukee Suburbs will extensively document every tenancy, nip maintenance in the bud, and handle all aspects of the tenant relationship. Reach out to us for assistance, or give us a call at 262-309-6961 to get started.

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