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Security Deposit

It is crucial for landlords to be fully informed about the Missouri law on residential lease security deposits because the courts strictly enforce the statute. More than a few landlords have gotten in trouble for not scrupulously following the statute.

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Introduction

Landlords and property managers should strictly comply with the Missouri Security Deposit statute, Section 535.300 of the Missouri Revised Statutes, because non-compliance entitles a tenant to recover twice the amount wrongfully withheld from a security deposit. Missouri courts strictly enforce the statute because it is deemed to be a “consumer protection” law. Any residential lease provision that conflicts with the statute will be deemed void.

Exceptions: The Security Deposit Statute only applies to security deposits required by residential leases. It does not apply to:

Pet Deposits – The statutory rules do not apply to deposits specifically designated as pet deposits. Pet deposits are not required to be refundable. The terms of the lease govern the use and refundability of pet deposits.

Commercial Lease Security Deposits – The statutory rules also do not apply to commercial lease security deposits. Such deposits are governed by the terms of the lease.

In the following discussion, the word “you” refers to the landlord or property manager.

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Basic requirements of the statute

If you fail to comply with any of the following requirements in any respect, or if you wrongfully withhold all or part of the security deposit, the tenant can obtain judgment against you for twice the amount wrongfully withheld.

1. You cannot collect a security deposit exceeding two months rent.

2. You must hold security deposits in an account at a bank, credit union or other depository institution that is insured by an agency of the federal government.

Note: Deposits may be commingled in an account with your other funds. However, the best practice is to hold deposits in a separate account. Interest earned on security deposits is your property.

3. You must give the tenant reasonable notice of the date and time you will inspect the premises after termination of the rental agreement to determine the amount of security deposit to be withheld. The inspection notice must be given either:

a. In person, or

b. In writing at the tenant’s last-known address (which can be the address of the leased premises if the tenant did not provide a forwarding address.

4. The inspection must take place at a reasonable time, and the tenant has the right to be present.

5. Within 30 days after termination the tenancy, you must either:

a. Return the full security deposit to the tenant, or

b. Furnish to the tenant a written itemized list of damages for which the security deposit, or any portion thereof, is withheld, along with balance of security deposit, if any.

Note 1: If you are deducting any amount for carpet cleaning, you must also send the carpet cleaning bill to the tenant at the same time – see the topic below headed “Special provisions for carpet cleaning.”

Note 2: You are deemed to have complied with the 30-day requirement by timely mailing the security deposit, or the list of damages and any balance of the security deposit, to the last-known address of the tenant. It is not an excuse for failing to timely mail the accounting that the tenant did not provide a forwarding address. If no new address is known, you should mail the materials to the address of the formerly leased premises.

6. The only amounts you are entitled to withhold from the security deposit are:

a. Unpaid rent pursuant to the lease.

b. Costs incurred to restore the property to its condition at beginning of lease, except for ordinary wear and tear. Costs can include repairs, replacements and cleaning.

Note: The statute does allow you to deduct routine carpet cleaning at the end of the lease from the deposit whether or not the carpet is damaged or soiled beyond ordinary wear and tear if you have appropriate language in your lease. See the topic below titled “Special provisions for carpet cleaning.”

c. Compensation for actual damages resulting from the tenant’s failure to give adequate notice to terminate the tenancy, provided that you must make reasonable efforts to re-lease the property and thereby reduce the amount owed.

Note: If your legitimate damages exceed the security deposit, nothing prohibits you from attempting to recover those damages by filing suit against the former tenant, but you will have to give credit for the security deposit against such damages.

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Special provisions for carpet cleaning

The statute allows you to include a clause in the lease specifying an amount that will charged against a security deposit for routine carpet cleaning at the end of the lease. If such a clause is included in the lease, the lease also must notify the tenant that there may be an additional deduction from the security deposit if more expensive carpet cleaning is required because of carpet conditions beyond ordinary wear and tear.

Whether or not carpet cleaning is mentioned in the lease with regard to the security deposit:

1. Any carpet cleaning charge against a security deposit cannot exceed the actual cost of the carpet cleaning.

2. A copy of your bill for carpet cleaning must accompany the security deposit accounting if carpet cleaning is being deducted from the security deposit.

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Pre-set deduction amounts

We have noted that many landlords include in their leases a schedule of pre-set amounts that will be deducted from security deposits for various types of damage.

We do not recommend this practice. When a security deposit claim is litigated, the court will allow you to recover only the actual amounts expended for repairs, replacements and cleaning. If pre-set amounts that were deducted from a security deposit exceed the actual costs, the court will find that there was a violation of the Security Deposit Statute and award the tenant twice the difference.

In short, you should always make security deposit deductions based on actual costs.

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Method of providing inspection notices, accountings and refunds

The Security Deposit Statute originated at a time when virtually all business was conducted either in person or through postal mail. It has not been updated to reflect new ways of doing business since the advent of computers and the internet.

We have been asked many times whether security deposit inspection notices may be sent to tenants by email or text message. Our opinion is that both emails and text messages constitute written communications and therefore comply with the requirement for a written inspection notice because both email and text messaging can be viewed as modern forms of “mail.” However, we strongly recommend email over text messaging because of the easier storage and retrieval of email messages. (Text messages would be viable, though, if a landlord has a computer-based text messaging system that stores and allows easy retrieval of text messages.)

We have also been asked on multiple occasions whether a security deposit accounting may be sent to tenants by email and refunds sent electronically. Again, because email can be seen as a modern form of “mail,” our opinion is that the accounting may be sent by email. We also believe electronic refunds are in compliance with the statute because making refunds electronically involves written communication over the internet to set up an ACH transfer or electronic payment through an online tenant portal.

If you are postal mailing security deposit accountings and refunds, you may wonder how to prove the date of mailing in case of a later dispute. Following are methods accepted by the courts:

1. Make a copy of the envelope, accounting statement and refund check. Have a policy of always writing the date of mailing on the copy and keep it in the tenant file. So long as you can testify this is your regular business practice, a court will find that you mailed the envelope on the date noted.

Note: You can enhance this procedure if you have a postage meter by making the copy of the envelope after applying the postage – the meter imprint will show the date the postage was applied.

2. Make a copy of the envelope, accounting statement and refund check. Take the envelope containing the statement and check to the post office and request a certificate of mailing. Keep the certificate in the tenant file.

We do not recommend sending security deposit accountings and refund checks by certified or registered mail because the statute does not require that, it is expensive, and there are often problems with certified and registered mail not being picked up by the intended recipients.

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Security deposit accounting to multiple tenants

You should always make separate refunds to each tenant. Many landlords and property managers include language in their leases stating that one security deposit refund check and one copy of the accounting will be sent to only one of the tenants in situations where there are multiple tenants. The tenant receiving the refund is then expected to send the accounting and appropriate shares of the refund to the other tenants. We have seen a number of court cases in which this refund and accounting procedure was found to be a violation of the Security Deposit Statute. To understand why, consider these examples:

There were four tenants in a rental unit. The security deposit accounting and refund of remaining deposit was sent to one tenant near the end of the 30-day period. The former tenant receiving the accounting and refund sent the other former tenants their shares of the refund after 30 days but did not send them a copy of the accounting. Therefore, three of the tenants did not receive their refunds within 30 days and did not receive the accounting at all, and thus they have a claim against you for violation of the statute.

Even worse, assuming the same setup, the former tenant receiving the accounting and refund kept all of the refund and did not send any money or a copy of the accounting to the other former tenants. In this situation, all the other tenants have a claim you for violation of the statute.

Make pro-rata refunds if necessary. Another issue relating to multiple tenants is determining the amount to be refunded to each tenant based on the amounts they paid toward the security deposit. If all the tenants contributed equally to the payment of the deposit, then their refunds can be made in equal amounts. However, sometimes the tenants may have contributed to paying the deposit in unequal amounts, or perhaps one tenant paid the entire deposit. In this situation, refunds should be made pro-rata in proportion to the amount each tenant contributed to the original payment of the deposit. This requires you to inquire about the sources of security deposits when they are made.

Do not try to adjudicate damage claims between tenants. Another issue that sometimes arises when there are multiple tenants is that one tenant may say, “I didn’t do that damage, so I shouldn’t have to pay for it.” If this happens, you should explain to the tenants that they are all jointly liable for any damage under the lease, that you are not a judge and cannot adjudicate which tenant is responsible for which damage, and that if a tenant believes another tenant should be responsible for the damage deduction, that tenant has the right to sue the responsible tenant.

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Damages not ascertained within 30 days

Sometimes cleaning, replacements and repairs cannot be completed in time to provide a tenant with an accounting (and possible refund) within 30 days. This situation is not a legal excuse for failing to send the tenant an accounting/refund within 30 days.

In this situation, which usually occurs when there are extensive damages that will exceed the deposit, get as good an estimate of the damages as possible and within 30 days send the tenant an accounting including language to the following effect:

“We have been unable to complete cleaning, replacements and/or repairs within 30 days after you vacated the rental unit. The amounts itemized in this accounting are estimates based on past experience and professional judgment and are believed to be the same as or very close to the actual costs when the work is completed. We will send you a final accounting based on actual costs as soon as the work is completed.”

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Security deposit forms

Landlords need two forms to comply with the requirements of Missouri’s security deposit statute:

1. Notice of Security Deposit Inspection – this is available as Form 8.

2. Security Deposit Statement – this is available as Form 9.

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Forfeiture clause not enforceable

Some leases, particularly those obtained from non-Missouri sources, contain a clause purporting to “forfeit” the security deposit if the tenant violates the lease.

Because the Security Deposit Statute is deemed to override such a lease clause, the courts will not enforce a forfeiture, and if an issue relating to the security deposit is litigated, the court will always give the tenant credit for the security deposit against all monetary losses (unpaid rent, property damage, etc.) you may claim.

Thus, security deposit accountings should always give full credit for security deposits paid by the tenant even if the tenant has breached the lease.

We strongly recommend that a security deposit forfeiture clause not be included in leases because of the danger that you or an employee may forget or be unaware of the unenforceability of the clause and rely on the clause in withholding the deposit. This can lead to litigation by the tenant and a judgment against you for twice the deposit. We have seen this happen on several occasions.

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Statements made during security deposit inspections

When landlords sue or counterclaim against tenants for property damage, tenants sometimes attempt to use statements the landlord made during the inspection to defend against the landlord’s claim. Typically, the tenant will say something to the effect, “The landlord didn’t mention that problem during the inspection, so I shouldn’t have to pay for it.”

However, as most landlords know from experience, it is common that a particular problem may not be noticed during the security deposit inspection but will be noticed later when there is more time to look at the unit or when actual repairs are being made.

In view of this problem, JPS recommends that the following sentence be included in the security deposit clause of residential leases:

“Any statements or estimates made by lessor or lessor’s representative during inspection are subject to correction or modification before final security deposit accounting.”

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Meaning of “ordinary wear and tear”

Landlords and property managers often ask for a definition of “ordinary wear and tear.” Unfortunately, there is no clear-cut definition in the statutes or in Missouri court cases.

Courts describe the determination of ordinary wear and tear as being an “issue of fact.” In a case involving property damage, this means that the court will consider all the facts introduced into evidence by both sides and make a reasonable, common-sense evaluation of whether particular items of claimed damage are within or beyond ordinary wear and tear.

The word “ordinary” in the phrase :ordinary wear and tear” invokes well established principles in the law relating to “negligence.” The courts define negligence as the failure to exercise that degree of care that the average ordinarily careful person would exercise in the same or similar circumstances. To give an example, the ordinarily careful person would take care when burning candles not to allow wax to drip onto carpets, so wax embedded in carpets is likely to be found to be damage beyond ordinary wear and tear.

Note: It is very clear that intentional damage done by a tenant will be found to be in excess of ordinary wear and tear. A good example of this is a hole caused by an angry tenant punching or kicking a wall or door.

Some examples and observations from our long experience in dealing with the issue of ordinary wear and tear in court may help:

Repainting: It is to be expected in the ordinary course of living in a rental unit that some soil will accumulate on painted surfaces. Unless there is an unusual amount of soil, a court likely would find that repainting costs cannot be charged to the tenant. However, major stains and scuff marks may prompt the court to award painting costs.

Tenant repainting: Another situation in which repainting costs generally are awarded is when the tenant repainted without permission and did a sloppy job, or used colors not approved by the landlord.

Holes: Another painting issue involves holes in walls, often resulting from the tenant having hung pictures and photographs. If the tenant has filled the holes with spackling that matches the paint, and there is no other particular reason to paint, the court likely would not award repainting costs. However, if the holes have not been filled, or the holes were filled with spackling that does not match the wall color, the cost of filling the holes and/or the cost of painting may be awarded.

Routine repainting: Some landlords have a routine practice of totally repainting every time a rental unit turns over – in this situation, the court will not award repainting costs unless there was paint damage beyond ordinary wear and tear.

Flooring: Issues often arise concerning recovery for damage to carpets, vinyl flooring, linoleum and wood floors.

Carpets: If the tenant has been careful with the carpets and routinely vacuumed during the tenancy, any normal traffic wear on the carpets likely will be found to be within ordinary wear and tear. However, if the carpets have stains that cannot be removed by normal cleaning processes, or tears or burn holes, then the court likely will give you an award for replacing the carpets. The court may require, however, that the amount awarded be pro-rated based on the expected life of the carpet – for instance, if a carpet is expected to last 15 years and must be replaced after only five years, then the court would award 2/3 of the replacement cost.

Vinyl flooring and lineoleum: Normal traffic wear on vinyl flooring or linoleum will not be deemed compensable by the court. However, if the material is stained such that it cannot be cleaned, or has burn holes, or is ripped, then the replacement cost may be allowed. As with carpet, the court may require the replacement cost to be pro-rated based on the expected lifespan of the material.

Wood floors: Again, normal traffic wear on wood floors will not be seen by the court as compensable. However, if the wood flooring is scratched, gouged, stained, etc., then the cost of refinishing the floor likely will be awarded. In extreme cases, the court might allow an award for replacement of a wood floor, again requiring pro-ration based on the expected lifespan of the wood flooring material.

Hardware: In the normal course of usage, certain items of household hardware will wear out and need to be replaced, and in such cases, the court will not give an award for the replacement. However, if the hardware item was clearly abused or intentionally damaged, then the court likely will grant an award for replacement. For instance, if a doorknob becomes worn and unusable as a result of normal use, no replacement cost will be granted; however, if the doorknob was ripped off in a fit of anger, then the replacement cost will be awarded.

Plumbing fixtures: As with hardware, plumbing fixtures will wear out with age and parts will need to be replaced. Toilets and faucets are particular problems. Unless it is clear that the plumbing fixture has been abused or intentionally damaged, the court is not likely to award replacement costs. However, we have seen awards for cracked sinks, toilets and tubs, cracked toilet seats (unless the seat was of low quality to start with), heavily soiled tubs and sinks, and drain stoppages caused by, for instance, items such as sanitary napkins or disposable diapers having been improperly flushed in the toilet.

General cleaning: Assuming the unit was clean when the tenant moved in, the landlord’s cost to restore the unit to its initial state of cleanliness is recoverable – because the tenant’s obligation is to return the unit in the same condition as when originally occupied, ordinary wear and tear excepted.

In conclusion, when you are faced with the question whether a particular issue constitutes damage beyond ordinary wear and tear that is not discussed above, the best advice we can give is that you should ask yourself:

“Is this damage something that could happen if the tenant exercised the same degree of care that the average ordinarily careful person would exercise in the same circumstances?”

If the answer is “yes,” then the item of damage should not be charged to the tenant.

If the answer is “no,” then the item may be charged to the tenant.

Even when the landlord or property manager is cautious about what items are charged against a tenant’s security deposit, we have found that tenants sometimes disagree, and some will file a Small Claims Court lawsuit against the landlord to recover amounts they feel should not have been deducted. When this happens, we have generally found that landlords who can articulate a reasonable basis for items of damage being beyond ordinary wear and tear based on the discussion above will win such lawsuits.

Landlords and property managers who are uncertain whether to claim a particular item as damage beyond fair wear and tear after reviewing the discussion above are welcome to consult with us. We will endeavor to give our best advice based on our experience dealing with such issues in court over a period of many years.

PRO TIP: Protect yourself by documenting the pre-existing condition of a rental unit. A good way to do this is to take photographs of the unit’s condition before a tenant moves in. Also, be sure to save bills and other documents showing any work done on the unit before the tenant moved in.

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Determining when a lease terminates

When does a lease terminate? Depending on the circumstances, sometimes it can be difficult to determine when a lease “terminates” and thus starts the 30-day period to account for the security deposit. Following are some guidelines for making this determination:

If the lease contains a definite termination date and the tenant moves out on or shortly before that date, then the termination date specified in the lease should be used. If the tenant moves out some time after the lease ended, our opinion is that you have 30 days from the date the tenant actually vacated to account for the security deposit.

If the lease contains a definite termination date but the tenant “skips” before that date, the lease will terminate on the earlier of the termination date specified in the lease or at midnight on the day before a new lease to a subsequent tenant takes effect (you are required by law to make good faith efforts to re-rent the premises and thereby “mitigate” your damages). Examples:

Assume the lease specifies a termination date of May 31. Tenant skips in January. You make good faith efforts to re-rent, and a new tenant signs a lease effective April 1. In this case, March 31 would be the termination date for the old lease, and the security deposit accounting would be due within 30 days of March 31.

Assume the lease specifies a termination date of May 31. Tenant skips in January. Despite your best efforts, you are unable to re-rent the premises before May 31. In this case, May 31 would be the termination date, and the security deposit accounting would be due within 30 days of May 31.

Oral month-to-month leases, or written leases that have become month-to-month leases, present unusual problems in determining a termination date for security deposit accounting purposes. In these situations, it is recommended you consult with JPS.

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Effect of lease renewals on security deposits

If a lease is being renewed and all same tenants will remain, the security deposit paid under the prior lease can simply be “rolled over” with a notation on the renewal that the deposit was paid under the prior lease.

A problem arises, however, if a lease is being renewed and at least one tenant is not going to remain on the renewal lease. In this type of situation, here is what should be done:

  1. Give all the current tenants a notice of security deposit inspection.
  2. Conduct the inspection.
  3. If there are deductions to be made from the security deposit, make the deductions on a pro-rata basis among the tenants based on what they paid toward the security deposit.
  4. Give a refund, if any, to the departing tenant, again on a pro-rata basis, along with the security deposit accounting.
  5. On the security deposit accounting for the continuing tenants, show that their remaining deposit, if any, is being applied toward the deposit due on the renewal lease and collect the difference to bring the deposit up to the full amount required under the renewal.

Simple Example: $900 deposit paid equally by 3 tenants. $300 in damage. Allocate $100 in damage to each tenant. Refund $200 to departing tenant. Give continuing tenants each $200 credit toward deposit for new lease and collect the balance of the deposit required under the new lease.

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Recommended security deposit clause for leases

Based on our many years of litigating security deposit issues and all of the foregoing principles, JPS recommends the following lease clause for security deposits:

Upon signing this lease and before being allowed to take possession of the premises, lessee shall deposit with lessor the amount of $___________, to be held as a security deposit for the performance of this lease by lessee. Interest received on the security deposit shall be the property of lessor. The security deposit is not a substitute for the last month’s rent, and lessee agrees to make timely payment of the last month’s rent. Lessor shall be entitled to deduct from the security deposit: (a) All unpaid rent owed through the end of this lease; (b) expenses related to repairs, painting or cleaning necessary to restore the premises and furnishings to their condition as at the beginning of the lease, ordinary wear and tear excepted; and (c) $________ which shall be deducted for carpet cleaning unless lessee provides proof that the carpets have been cleaned by a professional carpet cleaning company acceptable to lessor at or near the time lessee vacates the premises (lessee is notified that there may be a larger deduction from the security deposit for carpet cleaning than specified above if more expensive carpet cleaning is required because of carpet conditions beyond ordinary wear and tear). Lessee agrees to be liable for all such charges that exceed the security deposit. Lessee agrees to follow any written move-out instructions provided by lessor. Lessor will give lessee reasonable written notice at lessee’s last-known address, or in person, of the date and time when lessor will inspect the premises to determine the amount of the security deposit to be withheld, if any, and lessee will have the right to be present during inspection. Any statements or estimates made by lessor or lessor’s representative during inspection are subject to correction or modification before final security deposit accounting. Pursuant to law, within 30 days after termination of this lease, lessor will mail to lessee, at lessee’s last-known address, a written itemized list of charges withheld from the security deposit (if any), a copy of the carpet cleaning receipt, and the unexpended portion of the security deposit (if any). Lessee must provide a forwarding address; if no forwarding address is provided, lessee agrees that the inspection notice, itemization of charges (if any), carpet cleaning receipt, and refund (if any), may be mailed to the address of the premises. If more than one lessee signed this lease and paid a security deposit, all deductions from security deposits shall be pro-rated according to the amount of the deposit paid by each lessee, and a separate accounting and refund (if any) shall be sent to each lessee. If lessee vacates the premises on or after the termination date of this lease, the 30-day period to account for the security deposit shall begin only when all of lessee’s property has been removed, all occupants have departed, and all keys and other access devices (such as garage door openers) have been delivered to lessor. If lessee abandons the premises before the termination date of this lease, the 30-day period to account for the security deposit shall begin on said termination date or the date lessor re-rents the premises, whichever is earlier.

Note: While materials on this website are copyrighted by JPS, landlords and property managers have our permission to use the above security deposit clause verbatim.

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