Alaska landlords and tenants have a responsibility to know the laws that govern security deposit when it comes to renting and leasing. Every landlord should have a knowledge of specific security deposit procedures and requirements in their state and adhere to them. The are accountable for tenants’ deposits, but tenants should also know and understand their legal rights as they pertain to security deposits and leasing a property.
Quick Facts for Alaska
- The security deposit cannot exceed 2 months’ rent.
- Landlords have 14 business days to return the deposit after move-out.
- If there are deductions, landlords have 30 days.
- Landlords must pay double the deposit if it is not returned in time.
- Landlords must make a reasonable effort to contact the tenant and return the deposit.
The Purpose of a Security Deposit
Security deposits serve to ensure that a landlord is compensated, all or in part, for any loss, if a tenant causes any damage to the rental property beyond ordinary wear and tear, or vacates the rental unit without prior notice and first paying all rent owed. It’s essentially a kind of insurance against losses caused by tenants, either intentionally or through a breach of contract.
Allowable Security Deposit Charge in Alaska
AS 34.03.070 (a) establishes that landlords cannot charge a tenant a security deposit that is more than two months’ rent. However, this rule doesn’t apply to rental units where the rent is more than $2,000 a month. A landlord may further seek an additional security deposit from a tenant for having a pet on the premises that is not a service animal, but cannot be charged more than the rent for one month. See AS 34.03.070 (h)
Security Deposit Interest in Alaska
Alaska landlords are required to promptly deposit security deposits into a trust account in a bank, savings and loan association, or licensed escrow agent. However, . Although, if the deposit is placed in an interest-bearing account, the tenant is entitled to the interest earned under general trust law principles, unless both parties agree otherwise in writing. See AS 34.03.070 (c).
Is a Separate Security Deposit Bank Account Needed in Alaska?
According to AS 34.03.070 (c), landlords can commingle prepaid rent and security deposits in a single financial account, but those cannot be commingled with other funds. In other words, landlords should have a bank account solely for security deposits and prepaid rent.
Returning Security Deposits in Alaska
An Alaska tenant is required to give the landlord proper notice of moving out before seeking a refund of the security deposit. The landlord is required to provide a written, itemized list of rent owed, if any, and damages and any refund that the tenant is entitled to within 14 days of the lease termination date and any possession held by the tenant is delivered. See AS 34.03.070(b). The written notice and any refund must be mailed or hand-delivered to the tenant’s last known address. However, the landlord has 30 days after the lease has been terminated to mail the refund if costs are deducted for damages that the landlord has suffered that is caused by the tenant. In the absence of a tenant mailing address, AS 34.03.070 (g) states the landlord must make a reasonable effort to deliver the notice and refund to the tenant if he/she knows how to contact the tenant.
Failure to Return a Security Deposit in Alaska
If an Alaska landlord fails to return the security deposit within the 14-days required timeframe, tenants can get a refund that is double the amount of the original security deposit. Both landlord and tenant can seek to recover other damages to which either party may be entitled through legal proceedings.
Withholding Security Deposits in Alaska
AS 34.03.070 (b) maintain that landlords can withhold tenant’s security deposit, or a portion of the deposit for rent owed and any damages that the landlord has suffered as a result of a breach of the lease agreement or tenant failing to comply with the lease obligations/agreements. The landlord is required to provide the tenant with an itemized list of all deductions and the amount due and the remaining security deposit, if any.
Allowable Deductions from a Security Deposit in Alaska
An Alaska landlord may deduct from the security deposit the following:
- Payment of all rent owed by the tenant
- The amount to repair any damage caused to the rental property by the tenant
Applying Security Deposit as Last Month’s Rent in Alaska
Unless there is a written agreement between both parties, tenants cannot apply a security deposit as last month’s rent.
How to Get a Full Refund of Security Deposit in Alaska
An Alaska tenant can get their full security deposit back if after vacating the property the landlord finds that:
- No damage has occurred beyond that caused by normal wear and tear
- All rent is paid
Security Deposits and Tax Filing in Alaska
How security deposits are treated for tax purposes depends on whether or not a landlord retains or provide the tenant with a refund when the lease is terminated.
- Accounting for Security Deposits: Security deposits are treated as either assets or liabilities. It is not automatically rental income when it is received. Tenants aren’t allowed to deduct security deposits as expenses and landlords aren’t allowed to declare them as income until they become such. Security deposits are not income when in escrow and is intended to be refunded to the tenant, and only if, and after, a portion, or all is withheld for losses should a landlord treat it as earned income.
- Security Deposit Write-off: Typically, landlords cannot deduct security deposits when filing taxes as expenses until they are used, all or only a portion. If a landlord withholds part or all of the security deposit for unpaid rent, that amount can be included in his/her income in that year when filing taxes. Forfeited deposits should be included on a landlord’s tax return as income.
A deposit is taxable income only if and when a landlord has no obligation to refund the tenant.
“Normal Wear and Tear” vs. Damage in Alaska
- AS 34.03.070 (i) (1) defines “normal wear and tear” as deterioration that occurs from the intended use of the rental unit and without negligence, carelessness, accident, misuse, or abuse of the premises or contents by the tenant, members of the household of the tenant, or the invitees or guests of the tenant. “Normal wear and tear” are minor issues, such as gently worn carpets, loose door handles, fading wall paint and flooring, stained bath fixtures, lightly scratched glass and dirty grout that occur naturally as a result of the tenant using the property as it’s designed to be used and aging.
- “Damage” as defined in AS 34.03.070 (b) refers to destruction that is a result of abuse or negligence by a tenant during the tenancy period. Damage to the rental property can negatively impact its usefulness, value, normal function. Damage can include pet damage (heavily stained and ripped carpet), broken tiles, hole in the wall, broken windows and missing fixtures. It doesn’t include deterioration results from normal wear and tear or failure on the part of the landlord to prepare for expected conditions or not meeting particular obligations.
New Property Owner is Responsible for the Security Deposit in Alaska
The buyer inherits the liability of refunding the tenant’s security deposit and prepaid rents that may be owed to the tenant at the end of the tenancy. The buyer should make sure that the previous landlord transfers all deposits and notifies the tenants of the sale of the dwelling unit.
Alaska Law on Security Deposits
If you are interested in learning more about Alaska statutes on security deposits see Alaska Uniform Residential Landlord & Tenant Act- AS 34.03.070.
Tips for Alaska Landlords on the Right Practices for Security Deposits
- Do not charge a tenant more than two month’s rent for the security deposit
- Return security deposits within 14 business days of lease termination with an itemized written statement of any deductions
- Prepare to pay twice the amount of the original security deposit if you do not return the security deposit within the required timeframe
- Withhold security deposits for rent owed and damages
- Seek damages in legal proceedings if you feel entitled based on non-compliance by a tenant
Alaska deposit laws found in AS 34.03.070 are the best source of reference when seeking the answers to questions related to security deposits.
Landlords and tenants alike can benefit from knowing the laws that govern security deposits. When in doubt, consult a lawyer to assist you.