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Every time you approve a new tenant to reside in one of your properties, you incur the risk that this individual might cause damage to your property or refuse to pay rent for one reason or another.

One of the reasons that landlords charge security deposits is to protect them against financial losses when they allow a tenant on to their property and to motivate that tenant to comply with the terms of the lease.

Tennessee places some restrictions on security deposits, and landlords will want to ensure they comply with state rental laws when claiming some or all of a security deposit. While they don’t limit the amount that a landlord can charge, there are many rules regarding when a landlord can keep a tenant’s security deposit.

Landlords can retain a deposit for unpaid rent or breaches of the lease

Sometimes, circumstances necessitate that a tenant vacate the property well before the formal end of their lease. Circumstances that might necessitate a move could include health issues, trying to leave an abusive relationship, or losing a job and needing to move in with family.

Unfortunately, when a tenant moves out without much notice or before the end of their lease, the landlord managing the property will be the one who potentially loses out on several months of rent until they can find someone else to move into the unit.

You can also retain the deposit to cover charges listed in your lease associated with lease violations like having overnight guests or pets. If you can show that the tenant did not comply with their lease or moved out with an unpaid balance of rent owed, you will be able to retain up to that amount from the security deposit to reimburse yourself.

Landlords can use deposit funds to correct damages caused by tenants

When a tenant first assumed possession of the property, you probably had them fill out an inventory of any existing damage in the space. You will then use that inventory and any of your internal records about the unit’s condition to do a walk-through when the tenant leaves.

If you notice damage beyond standard aging or wear and tear, you can potentially take those damages out of your tenant’s security deposit. In order to do so, you will have to send written notice to your tenant and give them an appropriate amount of time to respond to your claim. You should return any unclaimed balance from the security deposit to the tenant within 60 days of the end of their tenancy.