Money’s funny. It makes people do funny things. That’s why they say you should never do business with friends or family. It’s the reason contracts are such a good idea. And, for landlords, it quickly becomes the reason for disputes…especially when a security deposit is in question.

The best thing property owners and managers can do is protect themselves from the time that will come when such a dispute occurs. That begins with knowledge and adequate preparation.

Know your lease and agreements.

This definitely goes in the ‘planning’ column. You need to know the laws of your state when it comes to security deposits, and you need to have an iron-clad, signed lease agreement with all tenants that includes details such as:

• Amount of deposit
• Any amount deemed non-refundable
• Amount of time before notice or refund will be received after lease termination
• Costs for which tenants could be held liable

Respond within the appropriate amount of time.

If you say in the agreement that you will provide notice to within 30 days of lease termination on partial or non-refund of deposit, and you wait until day 31, you’ve lost your footing. You now are mostly likely liable for refunding the entire portion of the deposit eligible for return. Make sure to investigate the unit promptly and provide notice quickly, including refunds when applicable.

Document everything.

With an iron-clad lease agreement in place, you’re more than half-way there. However, you need to document any and every issue you find when investing a unit after a move-out. If the oven is dirty and requires a $45 cleaning fee, take a picture of it and make a note. If the blinds in the living room are broken and weren’t upon move-in, take a picture and make a note. Just remember that reasonable wear and tear such as moderately-sized nail holes for hanging pictures cannot be a deduction.

Provide evidence.

Now take all those notes you just created, develop a single spreadsheet with all applicable notes on damages or related issues for which deductions are being taken. Send that spreadsheet along with the photos and a copy of the lease contract to the former tenant. This is a good time to include a check for any balance on the account.

Get an attorney.

There are two instances in which you may need an attorney. The first is under those circumstances in which the tenant has done so much damage to the property, it goes beyond the coverage provided by the security deposit. If you send the evidence letter and demand repayment for damage and cannot get it, an attorney may be needed – it all depends on whether the amount is worth your time and effort.

The second instance occurs when you have an irate tenant who demands repayment regardless. In these situations, it’s best not to try to handle the issue yourself. Let a professional take over who can allow you to return to your business of effective daily property management.