Have you just broken into the world of real estate investing and are looking to understand your legal obligations?

Are you a seasoned landlord just looking to refresh your knowledge about the Tennessee security deposit laws?

As a landlord in Tennessee, you have a variety of legal obligations 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 laws.

So, we at Brentwood Square have put together the following guide to help bring you up to speed with your legal obligations regarding Tennessee security deposit laws.

Setting a Security Deposit Limit

setting a security deposit limit

As per the Tennessee Security Deposit Laws, there are no limits as to how much security deposit you can ask from your tenant. However, most landlords are keen not to overcharge their tenants as doing so, would only make more difficult to rent out their units.

Broadly speaking, a security deposit that is equivalent to one month’s rent should be enough to cater for typical financial damages.

Storing a Tenant’s Security Deposit

As per Tennessee security deposit saws there is a distinct way in which you must store your tenant’s security deposit. Specifically, it must be in a separate account, but it does not need to be interest bearing.

Additionally, the account must be in a financial institution that is either subject to federal regulations or the Tennessee state regulations. If you fail to store your tenant’s deposit according to these requirements, you may forfeit your right to keep any portion.

Receipt of the Security Deposit

Once you receive your tenant’s deposit, you must notify them of the same. In the notice, you must let your tenant know of the name and address of the banking institution holding their deposit.

Deductions to a Tenant’s 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.
  • Cover unpaid utility bills.
  • Other breaches to the lease agreement.

Charging an Additional Pet Deposit

pet deposits

On top of the regular deposit, landlords who accept pets into their property are also allowed to ask for an additional pet deposit.

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. 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.

Returning a Tenant’s Deposit

In Tennessee, you are only allowed to return the deposit (or whatever remains of it) after you have made the deductions. After that, you 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 the tenant does not respond to the refund within the 60 days after notifying them, you can keep the remaining portion without any liability.

In the absence of a mailing address, 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 to the incoming landlord. Next, you must then notify your tenant of the same. In the written notice, you must, at the very least, let them know of the name and address of the new owner.

Last Month’s Rent

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

walk through home inspection

As per Tennessee security deposit 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:

  • 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 tenant vacating the unit.
  • 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. This includes tenants who have:

  • Abandoned the property.
  • Moved out without serving proper 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 is 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.

Disclaimer: This blog is not meant to be used as a substitute for the professional legal advice of an attorney or property management company. Also, laws change and this post might not be updated at the time of your reading.