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.

What is considered excessive damage that warrants keeping the security deposit?

rental property with excessive damage so landlord can keep security depositA security deposit is standard operating procedure for most landlords; charging a fee to cover any excessive wear and tear to the rental unit is a protection for the landlord.  While that protection is completely logical, the reasons for keeping the security deposit may not be as obviously logical; for example, worn carpet or dirty curtains does not qualify as valid legal reasons to keep the security deposit in Wisconsin.

What is considered excess damage?

Note the first part of this phrase: excess.  The Wisconsin legal system assumes that all units need to be cleaned after the tenant has moved out; therefore the damage that warrants retention of a security deposit needs to be extreme. To make sure the landlord has all legal bases covered, documentation of the condition of the unit before the tenant moves in and after the tenant moves out is important.

What is excess damage that would warrant keeping the security deposit?

This list is not an all inclusive list; however, this list can give you an idea of “excessive” damage situations that warrant keeping the security deposit:

  • Drywall damage (large hole or many small holes)
  • Broken bathroom faucets
  • Missing window treatments
  • Insect/pest problems that require an exterminator
  • Rips in the carpet or excessive stains
  • Mold on the walls

Again, all of these issues need to be problems that weren’t present at the time of move-in; thorough documentation of the unit before the tenant moves in is key.

When do I have to return the security deposit?

In Wisconsin, a landlord has to return the security deposit within 21 days after the tenant has moved out. If the tenant threatens any kind of legal recourse, a landlord can contact a local attorney for information specific to the local regulations.

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