Security Deposits: 5 Things Landlords Need to Know

rental agreement document

A security deposit is a common part of the property rental process that can lead to frustration and legal issues. While a landlord doesn’t necessarily need to know every line of the Wisconsin landlord tenant law, a property owner should know the basics of setting, deducting from, and collecting security deposits.

Is there a maximum amount of security deposit that can be charged in Wisconsin?

No. Presently, there is no limit on the amount of security deposits that can be charged in Wisconsin. Local municipalities may have set amounts for security deposits, and should be consulted for information before renting a property.

What does the landlord need to provide before and after receiving a security deposit?

There are legal requirements that a landlord must meet before and after receiving the security deposit. The landlord must provide a sheet for the tenant to document the condition of the rental property and let them know the deadline for return (a minimum of seven days). A copy of the rental property agreement needs to be given to the tenant. Other information needs to be provided as well, including (but not limited to):

  • any habitation issues,
  • any code issues,
  • any utilities that need to be covered by the tenant (and how the amount of utilities is billed to the tenant),
  • notice that a request can be made about any charges deducted from the previous tenant’s security deposit.

If the security deposit is a cash payment or if the tenant requests a receipt, the landlord needs to provide a receipt to the tenant. The receipt needs to include the amount of the payment, date received, and other required information.

When can a landlord keep the security deposit?

A landlord can keep the security deposit for several reasons:

  • Tenant damage to the property (beyond normal wear and tear),
  • Unpaid utilities or rent,
  • Cleaning costs,
  • Early termination of the lease for rent under the remaining lease term and reasonable costs to market/re-rent.

It should be noted that property damage can not be as minor as dirty curtains or a nail hole in the wall. Landlords may keep a security deposit for some of these reasons (this list is not all-inclusive nor a guarantee that they are appropriate for withholding in your circumstances):

  • Holes in the drywall
  • Faucets that don’t work due to tenant damage
  • Window treatments that have been removed
  • Pest problems that are so severe an exterminator needs to be called
  • Holes or large rips to the carpet
  • Mold on any surfaces

Another reason for withholding all or part of a security deposit is cleaning costs. These costs can be deducted from the security deposit if there is significant cleaning that needs to be done in the unit. Wisconsin law assumes that all rental properties are cleaned after a tenant moves out. Normal cleaning, such as a light cleaning of the kitchen, is not grounds for deducting from the security deposit.

The amount of missed rent payments or utility payments can also be deducted if spelled out in the property rental agreement. If a landlord has questions about whether to deduct funds, the landlord should contact a local lawyer for advice.

How can I protect myself from disagreements with tenants about the security deposit?

There are many ways a landlord can avoid any conflicts regarding the security deposit with tenants:

  • Screen tenants legally during the selection process. (Ask an experienced lawyer for ways landlords can legally vet potential tenants.)
  • Use a legal rental agreement that follows local regulations. (Contact a local lawyer for information.)
  • Keep a signed legal rental agreement on file.
  • Take photos of the property to document the condition of the rental before tenants move in.
  • Provide a standard condition report to all tenants, and file the document in case of future issues.
  • Keep careful documentation of all rental payments.
  • Record the date when tenants give notice.
  • Take photos of damage after tenant moves out.

When does the security deposit need to be returned?

In Wisconsin, a landlord has to return the security deposit or provide a statement with a list of deductions taken from the security deposit within 21 days after a tenant has left the property or when the rental agreement terminates, whichever is first. If the tenant threatens any legal recourse, a landlord can contact a  local attorney for information specific to the situation.

Landlords: 6 Things to Do Before You Rent

key passed from landlord to tenantThere’s more to owning a rental property than marketing your house or apartment building—especially if you want to avoid legal headaches later. Complete these tasks before your tenant move in day to make the renting process smooth for you and your tenants.

Make repairs.

If you want to prevent future issues, and to attract potential tenants, the property should be in good working order. Before you rent out your apartment, test the major systems to ensure they are functional: heat, air conditioning, plumbing, electrical system. Check any part of the home that involves health and safety, such as smoke detectors, exits, etc.

Make or schedule any repairs that need to be done before the tenant moves in. If the repairs are in progress, let the potential tenants know that the repairs are going to be done and the timeline for completion.

Clean.

Rental properties should be cleaned before the tenants move in, especially areas where repairs have been made. If you don’t have the time, hire a cleaning service to give the home a deep clean, especially the bathroom and kitchen.

Document.

Taking photos and keeping good records is an integral part of renting out a property. After all repairs are made and cleaning is complete, take photos of every room. Keep records of every repair made, such as receipts and inspection forms. Filing away documentation and maintaining proper records is an important part of being a landlord and can save you from many headaches later.

Vet potential tenants.

What the landlord can do varies from state to state, and sometimes from year to year depending on current laws (contact a lawyer for more information). In Wisconsin, landlords can do a background check with the potential tenant’s permission as long as they provide the tenant with the results. If you want to know what vetting procedures you can do legally, contact a lawyer for what current laws specify.

Review the lease.

A lease needs to meet all local legal standards (which varies from state to state) without placing additional undue burdens on the landlord. Be wary of online lease templates that put extra work on your shoulders; instead consult a local lawyer for a lease that fits both criteria. Go through the lease thoroughly with the tenants. When potential tenants have signed the lease, provide them with a copy and file the original with other records.

Collect.

Before move in day, collect the first month’s rent and security deposit (unless the tenant is waiting on government assistance). If you haven’t already, provide the tenant with a copy of the signed lease and a copy of the background check. A little due diligence now, along with expert advice, can save you funds and headaches in the future.

The materials on this website are provided for informational purposes only and do not constitute legal advice. These materials are intended, but not promised or guaranteed to be current, complete, or up-to-date and should in no way be taken as an indication of future results. Transmission of the information is not intended to create, and the receipt does not constitute, an attorney-client relationship between sender and receiver. You should not act or rely on any information contained in this website without first seeking the advice of an attorney.