Disclaimer: Please note that the information provided in this blog is intended for general guidance and should not be considered as a replacement for professional legal advice. It is important to be aware that laws pertaining to property management may change, rendering this information outdated by the time you read it.
Have you just broken into the world of real estate investing and are looking to understand your legal duties regarding a tenant's security deposit? Are you a seasoned landlord just looking to refresh your knowledge about the Tennessee security deposit law?
As a Tennessee landlord, you have a variety of legal duties that you must follow such as the Tennessee landlord-tenant laws. And among the many you need to strictly adhere to are the Tennessee security deposit law.
We at Brentwood Square have put together the following guide to help bring you up to speed with your legal obligations under the Tennessee landlord tenant law regarding the security deposit laws and security deposits in Tennessee.
Setting a Security Deposit Limit
Under Tennessee Security Deposit Laws, Tennessee landlord tenant laws and building codes, there's no strict limit on how much security deposit you can ask from your tenant. However, most Tennessee landlords prefer to keep it reasonable to avoid overcharging tenants. Overcharging could make it harder to rent out the unit and might even cause issues with the lease agreement.
It's also important to ensure the deposit covers any unpaid rent and damages while remaining fair. When the tenant vacates the premises, you should provide a receipt for any deductions and a refund for the remaining balance.
Keeping things fair and balanced helps foster a positive renting experience for both parties!
Broadly speaking, a security deposit that is equivalent to one month’s rent on the lease agreement and should be enough to cater for typical financial damages. But again, the security deposit in Tennessee is not limited.
Storing a Tenant’s Security Deposit
According to Tennessee law, there are specific requirements for how you must store your tenant's security deposit. These deposits must be kept in a separate account, but it doesn’t have to be an interest-bearing one. You must provide the tenant with a receipt confirming the amount you’ve received, along with the details of the account.
The account where the security deposits are stored must be with a financial institution that is subject to either federal or Tennessee state regulations.
If the security deposit is improperly handled, such as not being stored correctly, you may not be able to refund any portion of it.
If the deposit covers unpaid rent or damages to the premises, make sure all conditions are clearly outlined in the lease agreement to avoid confusion later on.
Receipt of the Security Deposit
Once you receive your tenant’s security deposit, you must notify them in writing. This written notice should include the name and address of the banking institution holding their deposit, the details of the separate account, and any information about the maximum security deposit allowed under the law. Additionally, the notice should clarify that the deposit may be used to cover unpaid rent or damages, if applicable.
Deductions to a Deposit
As per Tennessee Security Deposit Laws, you can keep all or part of your tenant’s deposit for certain reasons, such as:
- To cover unpaid rent.
- To cover excessive property damage, that is not normal wear and tear.
- Cover unpaid utility bills once the tenant vacated the property or the lease or rental agreement has ended.
- Other breaches to the lease or rental agreement.
Charging an Additional Pet Deposit
On top of the regular deposit, landlords who accept pets into their property are also allowed to ask for an additional pet deposit under the law governing security deposits.
According to a study by PetFinder, the average pet deposit is anywhere between 40- and 85% of the rent. So, if you are renting out your property for $2,000 a month, then you could charge a pet deposit ranging between $800 and $1700.
But tenants with service animals are exempt from paying such fees under Tennessee's security deposit act. This is because, according to the Fair Housing Act, disabled tenants with service pets deserve equal access to housing. By requiring them to pay that fee, you would be curtailing their right to use and enjoy their home.
The Fair Housing Act is a very important peice of legislation, so if you have any questions regarding it, please contact ourselves at Brentwood Square Management.
Returning a Tenant’s Deposit
In Tennessee, you must return the deposit (or whatever remains of it) after you have made the deductions. Tennessee landlords will have anywhere between 30 and 60 days to return it after the tenant’s move out date. This may change during an eviction process, in such a case we would advise contacting a legal professional or property management company.
If a tenant requests to re-evaluate the deductions or claims damages are normal wear and tear, you may need to seek legal assistance as per the landlord tenant laws before returning any deposit owed.
As per the security deposit law, if the tenant does not respond to the refund within the 60 days after notifying them, the tenant loses remaining portion without any liability. In the absence of a mailing address, under landlord tenant laws and Tennessee law, you must exert reasonable effort to find out the tenant’s new address.
Sale of Rental Property
In the event you sell the property, you must transfer all deposits, as per the landlord tenant laws and Tennessee law, to the incoming landlord. Next, you must then notify your tenant of the change in a tenant's written notice. When giving proper written notice, you must, at the very least, let them know of the name and address of the new owner.
Last Month’s Rent
As per the states landlord tenant act governing security deposits, the security deposit serves a different purpose than rent. As such, it cannot be applied as last month’s rent. The only exception to this is if there is a written agreement between you and your tenant allowing it.
Walk-Through Inspection
As per Tennessee security deposit laws and the landlord tenant laws, walk-through inspections are mandatory. You must conduct them and make a list of any damages you have come across, during the inspection. The following are the rules you must abide by when conducting the walk-through inspection or else a tenant can pursue legal action:
- Your tenant has a right to be present during the inspection and you must notify them of your intention to have it. The notification must be sent in either of two scenarios. That is, when serving your tenant, a notice to vacate, or 5 days of receiving their notice to move out.
- The walk-through inspection must take place within 4 days prior to the time the tenant vacates the unit during normal business hours.
- Landlords have the right to set the inspection time, but your tenant can request a time that may be convenient for them.
- If your tenant chooses not to be present for the inspection, they lose any right to contest any damages listed in the inspection report.
- If your tenant attends the inspection, then both of you must go through the property and compile a list of any damages. The two of you must also append their signatures on the list. If your tenant refuses to do so, you can pursue a legal action.
Not all tenants have a right to a walk-through inspection. As per Tennessee's security deposit law, this includes tenants who have:
- Abandoned the property without letting their Tennessee landlords know.
- Moved out without serving proper tenant notice.
- Been evicted through a court order.
- Failed to respond to the landlord’s request to inspect the unit.
Regardless, you must send a copy of the report to tenant if they request it. You must do so via certified mail.
Bottom Line
It's important for all landlords in Tennessee to understand their legal obligations regarding the Tennessee security deposit laws. So, if you have a specific question regarding this content or anything else a property management company could assist with, kindly contact Brentwood Square Management Services, Inc. for expert help.
