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.

7 Tips for Managing Your Rental Property (Well!)

words, "home insurance" "rent" "house"---all the terms associated with being a landlordBeing a landlord is more than finding tenants for a rental property; rather, it’s a process with legal repercussions if you take a misstep along the way.  To protect yourself from those repercussions, and legally manage your rental property well, use these tips to achieve the best outcome for you and your tenants.

Vet a potential tenant before renting to them

You’d be foolish not to vet prospective tenants, but it’s essential that you know what actions you can take to vet tenants and what questions you can ask applicants.  Improper execution of either process can lead to legal repercussions from denied applicants.

Get—and file—a signed rental agreement

Don’t be in such a rush to rent that you neglect to have your tenants sign the rental agreement, or that you pass over the opportunity to review the terms of the rental agreement with them.  You should also provide your tenant with a copy of the signed agreement, and document the date and time that you provided the tenant with a signed copy.

Use a rental agreement that meets all the local regulations

Contact a local attorney to make sure the rental agreement you are using is updated and specific to your state and local regulations, protects your rights and the tenant’s rights, doesn’t include prohibited terms, and doesn’t place any additional and unnecessary obligations on your shoulders.

Document the condition of the premises

Documentation of the rental property should happen at two different points in the rental process: when the tenant begins tenancy and when they move out (or end tenancy).  Don’t ever underestimate the value of documenting as a landlord; if any problems turn into a legal proceeding, you, as the landlord, need to provide documents related to the situation.

Make repairs and do maintenance promptly

Many tenant-landlord disputes stem from essential repairs that weren’t performed by the rental property owner or manager—and the hazards to the tenant from repairs that weren’t made.  Have a regular maintenance schedule to keep your rental properties in satisfactory condition.

Know the do’s and don’ts of a security deposit

Security deposits are an essential part of the renting process, but can also become a source of conflict if you don’t follow regulations related to proper handling of a security deposit.  Know your rights as a landlord: when you need to return a security deposit, what can be deducted from the deposit, when you can keep a security deposit, etc.

Consult an attorney

Don’t assume that your actions are legal without contacting an attorney.  Even actions that seem common-sense can lead to legal repercussions later.

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.