Security Deposits in Georgia

Georgia’s security deposit laws are specific in detailing the rules that landlords should comply with. The security deposit laws are also for the benefit of tenants who should understand their rights when making a security deposit on a lease agreement, whether short-term or long-term. It’s bet that both parties become familiar with the statutes and make them applicable where necessary for compliance and protection.

The Purpose of a Security Deposit

Under GAC § 44-7-30, “security deposit” is money or any other form of security that a tenant gives to a landlord as part of a residential rental agreement and included damage deposits, advance rent deposits and pet deposits. A security deposit cannot be nonrefundable.

A security deposit is intended to serve as a safety net for landlords in the event that the tenant because the landlord some degree of financial losses by their actions while occupying the rental unit. It could be that the tenant skips out on paying the rent or damages the rental unit. A security deposit ensures that a landlord is compensated for unpredictable losses.

Landlords who manage more than 10 units must adhere to the security deposit rule set by the state.

Allowable Security Deposit Charge

In Georgia, landlords are not bound by a statutory limit on the amount of security deposit that a tenant can be charged.

Inspection Before Landlord Receives Security Deposit

According to GAC § 44-7-33 (a), before a tenant hand over a security deposit, the landlord should present the tenant with a comprehensive list of any existing damage to the rental unit. The tenant can inspect the unit to validate the list of damages before moving in, and also keep a permanent copy of the list. If there are no inaccuracies, the list should be signed by both tenant and landlord. If the tenant disagrees with any portion of the list and refuses to sign, he or she should specify in writing the specific damages that is disagreed on and sign to that.

Placement of Security Deposit

Georgia landlords have two ways of storing security deposits:

  1. Escrow account: This account should be established a banking or lending institution in the state of Georgia. Tenants should receive a written notice of the location of the escrow account from the landlord (OCGA § 44-7-31).
  2. Surety Bond: Instead of an escrow account, landlords can post a surety bond in the county where the rental unit is located. The surety bond should be the total amount charged for the security deposit (OCGA § 44-7-32 (a)).

Required Action to Return Security Deposit: Inspection

Before a tenant can get the security deposit returned, there are some initial steps to complete. The landlord is required to inspect the rental unit and create a complete list of any damage to the unit that the tenant is responsible for and the charge for each within three business days from the time the lease has been terminated and the property vacated, or surrendered.

The tenant can request to inspect the property and the list created by the landlord within five business days of the lease being terminated and the property vacated, or surrendered. The tenant can be present with the landlord during the inspection and should sign the list if it is accurate. If the tenant disagrees with the accuracy of the list of damages and refuses to sign, he or she should provide a written statement of the specific disagreement and sign to that (OCGA § 44-7-32 (b) (1)). Even if the tenant was absent during the inspection, he or she has a right to challenge the landlord’s assessment of the listed damage to the rental unit.

Furthermore, even if a tenant vacates without notice, the landlord should inspect the rental unit and create a complete list of any damage that the tenant has caused and the charge for each. (OCGA § 44-7-32 (b) (2)).

Returning the Security Deposit

Time Frame: Under OCGA § 44-7-34 (a), Georgia landlords have 30 days after getting possession of the rental unit following lease termination, or the surrender or acceptance of the unit to return the full deposit to the tenant. A tenant’s security deposit cannot be withheld to cover ordinary wear and tear from use of the rental unit for its intended purposes. Charge for damages caused by negligence, carelessness, accident, or abuse of the premises is a reason to withhold the security deposit, all or in part.

Itemized List: If the event that the landlord withholds a portion of the security deposit, the tenant must be provided with a written statement highlighting the exact reasons for withholding the security deposit. A complete list of the damages and the charge for each should accompany the statement, along with any remaining amount of the security deposit.

Delivery Method: The statement and any remaining security deposit payment should be delivered to the last known address of the tenant by first-class mail. In the event that the letter with the security deposit is returned to the landlord as undelivered and following a reasonable attempt by the landlord to locate the tenant, 90 days after the security deposit was initially mailed, the tenant forfeits his or right to the security deposit.

Allowable Deduction From the Security Deposit

Georgia landlords are allowed to make certain deductions from the security deposit OCGA § 44-7-34 (b):

  • Nonpayment of rent or fees for late payment
  • Abandonment of the premises
  • Nonpayment of utility charges
  • Repair/replacement work
  • Cleaning with third parties hired by the tenant
  • Unpaid pet fees
  • Actual damages caused by the tenant’s breach of the lease

Landlord Forfeit Right to Security Deposit

There are specific cases in which a landlord may not withhold a tenant’s security deposit (OCGA § 44-7-35 (a)):

  • Tenant’s security deposit was not deposited in an escrow account as required
  • Landlord did not create and present the initial damage list to the tenant as required
  • Landlord did not create and present the final damage list to the tenant as required
  • The landlord fails to provide the lists and written statements within the 30-day time period

Failure to Return the Security Deposit

If a landlord fails to return the security deposit that is improperly withheld, all or in part, the landlord will have to pay the tenant three times the amount of the original deposit, as well as reasonable attorney’s fees if relevant.

Rental Units Exempt From the Statute

GA Code § 44-7-36 establishes that Code Sections 44-7-31, 44-7-32, 44-7-33, and 44-7-35 doesn’t apply to landlords who own or manage ten or fewer rental units.

Rental Unit Changes Ownership

The former owner is responsible for transferring the security deposit to the new owner, who will then be responsible to give an accounting of the security, or the prior owner could refund the security deposit to the tenant directly.

Interest Not Required on a Security Deposit

Georgia doesn’t require landlords to hold the security deposit in an interest-bearing account. However, the tenant and landlord may establish an agreement in the lease that the landlord will place the security deposit in an interest-bearing account and the interest earned will be provided to the tenant.

Applying Security Deposit as Last Month’s Rent 

A security deposit is not intended to be used to cover the last month’s rent if the tenant vacates the rental unit without paying. It’s meant to cover damages/financial losses that the landlord has suffered because of the actions of the tenant.

How to Get a Full Refund of Security Deposit

When a tenant’s lease ends, a full security deposit can be returned if there is no damage beyond “normal wear and tear” to the rental property and rent is paid in full.

Security Deposits and Tax Filing

A security deposit can either be held to cover losses suffered by the landlord or refunded in full or part to the tenant. Depending on which happens at the end of the tenancy, determines how a security deposit is treated for tax purposes.

 

  • Accounting for Security Deposits 

 

Security deposits are treated as either assets or liabilities when filing taxes. It is not automatically rental income when first received. Tenants shouldn’t deduct security deposits as expenses when filing their taxes and landlords shouldn’t declare them as income when in escrow intended to be returned to the tenant at the end of the tenancy. Security deposits are not income until they become as such.

 

  • Security Deposit Write-off 

 

Usually, landlords cannot deduct security deposits when filing taxes as expenses before they are used for one purpose or another. If a landlord withholds part or all of the security deposit for unpaid rent, then that amount should be included as income for that year when filing taxes. Forfeited deposits should be declared as income on a landlord’s tax return. A deposit is taxable income only if and when a landlord has no obligation to refund the tenant.

“Normal Wear and Tear” vs. Damage

  • Normal wear and tear” is deterioration that occurs from the intended use of the rental property 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. It can include 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.
  • “Damage” refers to destruction to the rental unit that occurs because of abuse or negligence by a tenant during the course of the tenancy and can affect usefulness, value, normal function of the rental unit. Pet damage (heavily stained and ripped carpet), broken tiles, hole in the wall, broken windows and missing fixtures are all examples of damage.

Georgia Laws on Security Deposits 

Georgia security deposit laws can be found in GA Code § 44-7-30- GA Code § 44-7-37.

Tips for Georgia Landlords on the Right Practices for Security Deposits

  • Charge tenants a reasonable security deposit amount since there is no statutory limit established for landlords.
  • Present the tenant with a comprehensive list of any existing damage to the rental unit before collecting security deposit
  • Return security deposit 30 days after getting possession of the rental unit following lease termination, or the surrender or acceptance of the unit
  • Avoid paying three times the amount of the original security deposit by returning the security deposit within the required timeframe
  • Withhold security deposits for any financial losses, damage or other expenses
  • Seek damages in legal proceedings if the security deposit is insufficient to cover the losses caused by the tenant

It’s beneficial for both Georgia landlords and tenants alike to have an awareness of the security deposit laws that govern the state. Landlords can protect their assets, and tenants can protect their own interests by having a working knowledge of the rules of the security deposit laws. Over time, security deposit laws can be amended, which makes it important to stay up-to-date on the statutes.