The rental market in the Portland Metro area remains strong, with a vacancy rate of just 4.49% compared to the national average of 6.9%. Should your properties be giving you better returns?
One factor to look at is your security deposit. Security deposits reduce your repair costs if a tenant damages your property. You can charge up to two months' rent depending on the circumstances.
You must follow Oregon landlord deposit rules as well as Portland regulations or face fines and penalties. Keep reading for seven security deposit guidelines that will help you get more from your deposit policy.
1. Security Deposit Amounts Are Limited in Portland
The state of Oregon doesn't limit the amount of a security deposit, but the city of Portland does. In Portland, the security deposit can't be more than one and a half month's rent if it includes the final month's rent. If the deposit doesn't include the final month's rent, it shouldn't be more than one month's rent.
You may add another half month's rent to the security deposit as a condition for approving a tenant application that you would otherwise deny. Tenants may request to pay the additional amount in installments over a period of up to three months.
2. Security Deposits Must Be Held in a Dedicated Account
Portland rental deposit laws specify how you should hold security deposit money. Deposits must be held in a secure account at a financial institution separate from your personal and business accounts. The rental agreement should specify where the security deposits are being held and whether the account generates interest.
If you hold security deposits in an interest-bearing account, interest must be given to tenants with their unused security deposit. You may take a 5% administrative fee from the interest. You must give the tenant a yearly record of the account and any interest earned if they request it.
3. Landlords Must Give Tenants a Receipt for Security Deposits
Tenants need to receive written receipts for their security deposits after they pay. The amount of the security deposit should be listed in the lease agreement as well.
4. Reasons for Withholding the Security Deposit Are Limited
Landlords can keep some or all of the tenant's security deposit under certain circumstances. The most common scenarios involve damage to the unit.
Repair or Replace Damaged Items
You can only use security deposit funds to repair or replace items identified in the lease agreement. These can include:
- Fixtures, like blinds, carpet, and faucets
- Appliances
- Equipment, such as air conditioning units
- Personal property that may be found in furnished apartments, like furniture or dishes
Structural components like the walls and doors don't need to be described in the rental agreement.
Damage must exceed normal wear and tear. You can't use security deposits to cover:
- Routine maintenance
- Damage that wasn't the tenant's fault
- Expenses that your insurance or a warranty will reimburse
Paying for interior painting is generally not allowed. However, you can use the security deposit if the tenant damaged the wall beyond normal wear and tear or if they painted the walls without permission.
You can use the security deposit to repair or replace flooring if:
- Damage exceeds normal wear and tear, and
- Costs are limited to a defined impact area
For example, if a bedroom closet is damaged, you could replace the flooring in the closet but not in the rest of the bedroom.
A recent change to Portland rental deposit laws means you can use the security deposit for carpet shampooing. This is allowed if you cleaned or replaced the carpet before the tenant moved in and the lease specifies that you can use the security deposit for carpet cleaning.
Other Scenarios
You can use the security deposit to offset some types of financial damage, including:
- Unpaid rent or fees
- Other violations of the lease that cause you a financial loss
- Lost rent due to repairing or cleaning the unit
The lease agreement should specify under what circumstances you will withhold the security deposit.
5. A Walk Through Is Required
Before a renter moves into a unit, you must make reasonable efforts to schedule time for a walk through. This sets the baseline for determining whether you can deduct any costs from the security deposit.
You and the tenant walk through the unit together to fill out the condition report. The condition report notes any items that are damaged. If you can't find a time for a walk-through inspection with the tenant, you should complete the condition report yourself.
You need to take photos of any damage noted in the report and share them with the tenant. This is required whether or not the tenant did the walk through.
The tenant has seven days from the start of the lease to file an addendum to the condition report. If they don't submit an addendum, the condition report you created becomes final.
If the tenant submits an addendum, you have seven days to dispute it in writing. Otherwise, the condition report as modified by the addendum becomes the final version.
6. Tenants Can Request a Final Walk Through
A tenant can request to be present during a walk-through inspection within a week of moving out. This inspection should find any damage beyond wear and tear that isn't already described on the condition report.
7. Security Deposits Must Be Returned Within 31 Days
You must return a tenant's security deposit within 31 days after the tenant moves out. You also need to provide an itemized list of costs you withheld from the deposit. The tenant is responsible for giving you their new mailing address or information for an electronic transfer.
Final Landlord-Tenant Security Tips
Security deposits are an important tool for protecting yourself against the cost of repairing damage to your rental property. You must follow Portland regulations as well as Oregon landlord deposit rules. This helps you benefit from a security deposit policy without risking expensive fines.
You can simplify your rental property security management with a full-service property management company. The Alpine Group has been serving clients in the Portland area since 2003. We've built our reputation on personalized service, and we'll treat you and your renters with fairness and respect.
Schedule a consultation with The Alpine Group today to discuss how we can improve your tenant-landlord relations and boost your investment returns.
