- Standard Limit / Maximum Amount: One month’s rent (read more)
- Security Deposit Withholding: Absences of 20 days or more during a period of rent nonpayment without written notice to the landlord forfeits the tenant’s right to the return of a security deposit (read more)
- What Can Be Deducted: Unpaid rent, cost of damage to the unit, utilities owed, and unreturned “keys” (read more)
- Time Limit for Return: 14 days after the end of the lease (read more)
- Penalty if Not Returned on Time: Forfeiture of right to retain any portion of the deposit, and up to three (3) times the amount of the security deposit if willfully neglected (read more)
Purpose. Landlords use security deposits to secure additional financial protection against potential damage a tenant may cause to the dwelling. In some cases it can act as rent recovery protection, but mainly a security deposit covers damage to the property past normal wear and tear.
Legal Basics. Hawaii landlords can demand up to one month’s rent (plus up to an additional one month’s rent for a pet deposit) as a security deposit, which represents the totals that deductions may be made against. It must be returned within 14 days of lease termination, otherwise the landlord will forfeit the right to collect a deposit and may be charged up to three times the security deposit if willfully neglectful in its return.
Maximum Security Deposit Charge in Hawaii
In Hawaii, landlords cannot charge a tenant a security deposit that is more than one month’s rent.
Additional Pet Deposit: As an exception to the limit on security deposits, the landlord may charge an additional deposit of up to one month’s rent if the tenant will have a pet on the premises. Under Hawaii’s law, the landlord may ask for an additional pet deposit; however, people with disabilities who use service animals are entitled to full and equal access to housing. Thus, the tenant may not be discriminated against and the landlord may not require the tenant to pay extra to have a service animal. If the service animal causes damage to the rental unit, the tenant is liable to pay for any damages.
The Federal Fair Housing Act requires housing facilities to allow tenants who use service dogs and emotional support animals to have an equal opportunity to use and enjoy their home.
Security Deposit Withholding for Wrongfully Quit Dwellings in Hawaii
If a tenant is absent from the property without rent paid or a written notice to the landlord for a continuous 20-day period (or more), the tenant is deemed to have wrongfully quit. In this case, the landlord has a right to retain the entire security deposit without requiring individual deductions to be made.
Allowable Deductions on Security Deposits in Hawaii
The landlord may use the security deposit to make deductions only after the tenant has vacated the premises. The security deposit should be used to cover:
- The unpaid rent;
- Compensate for any money owed by the tenant for utility services which were provided by the landlord but not included in the rent;
- Failure to return all keys (including key fobs, parking cards, garage door openers and mailbox keys that were given to the tenant by the landlord);
- Clean the dwelling unit to a condition that the tenant entered into possession of the dwelling unit;
- Damages caused by the tenant who wrongfully quits the dwelling unit;
- Damages caused by any animal (including service animals) on the premises;
- The cost of damage caused by the tenant’s failure to comply with obligations as a tenant.
However, in order to qualify as damages to be deducted as a result of property damage:
- The damage must not be due to normal wear and tear (read more); and
- The cause of the damage must be the tenant’s failure to comply with obligations under the Hawaii Statutes.
Can the deposit be used by the tenant as last month’s rent? Only if both parties agree in the lease agreement.
“Normal Wear and Tear” vs. Damage in Hawaii
- “Normal Wear and Tear” refers to the deterioration of the property that happens when the property is used as intended by the tenants and their guests. Damage that comes from negligence, carelessness, accident, misuse, or abuse by the tenant or the people the tenant allows inside is not considered wear and tear. Minor issues that occur naturally like aging and expected decline as a result of everyday living and use of floors, surfaces, appliances, and furniture would be exempt from security deposit deductions. This includes major appliances like heat or air conditioning used within reason and minor damages like furniture, cabinet, or carpet wear.
- “Damage” occurs as a result of the tenant’s negligence – willfully or otherwise – which does not fall in line with a tenant’s responsibility under Hawaii Landlord Tenant Law. Tenants have a legal obligation to maintain the premises (within reason), so large holes in walls, broken furniture or appliances, burn marks, and other physical damage may be eligible for a deduction from security deposits in Hawaii.
Check out our article on wear and tear vs. damage to get a better idea of the difference.
The landlord can only charge the cost of repairs if the damage was caused by the failure of the tenant to comply with specific obligations. To comply with positive obligations under the said rule, the tenant must:
- Keep the premises, including all plumbing fixtures, clean and safe;
- Dispose of garbage and other waste in a clean and safe manner;
- Use all facilities (e.g. electrical, plumbing, air conditioning, etc.) and appliances reasonably;
- To not permit any person (including the tenant to willfully damage, destroy or remove any part of the premises, including the dwelling unit, facilities, equipment or appurtenances; and
- To inform landlord of any defective condition of the premises as soon as possible.
If the damage to the premises was caused by the tenant’s failure to comply with any of the above, then the landlord may take the cost of repairing it from the security deposit.
Returning Security Deposits in Hawaii
Time Frame: A Hawaii landlord has 14 days to return any unused portion of the security deposit along with a written itemized list of damages deducted (unless the tenant had wrongfully quit the dwelling unit). The notice should include written evidence of the costs of damages the tenant has caused to the premises and should include estimates and/or invoices for both the materials and services. This time period begins on the date of termination presented in the lease agreement, during which written notice should be mailed to the tenant’s forwarding address.
Failure to Return Security Deposit as Required: If the landlord refuses or fails to return the security deposit or the written notice (including the written evidence of the cost of damages) within the 14-day limit, the landlord shall return the entire amount of the security deposit to the tenant. If the landlord wrongfully retains the security deposit, the court may award the tenant up to triple the amount the security deposit (if willfully negligent). Otherwise, the landlord forfeits the right to make deductions from the security deposit and must return the full deposit if they are at fault for negligence.
Security Deposits and Tax Filing in Hawaii
Whether a security deposit will be treated as taxable or not depends on how the deposit is used.
Taxable Income: Security deposits are not automatically considered income upon collection at the beginning of tenancy. They only become taxable income when the landlord no longer has any obligation to refund them (such as for settling damages incurred). At this point they may also qualify as a write-off for tax purposes as well.
Reporting Security Deposit as Income: Whether or not security deposit should be reported as income and when to do so will depend on what it is being applied to or used as. Below are three simple rules the IRS has suggested to follow:
- If the deposit is forfeited due to a breach of the lease or applied to unpaid rent, then the amount kept should be declared as income in the year it was forfeited or applied.
- If the security deposit is used to cover expenses that are chargeable to it, then the landlord should only include the part of the deposit used as income if the landlord includes the cost of repairs as expenses. If the landlord doesn’t include them as expenses as a matter of practice, then there’s no need to include the part of the deposit kept to cover them as income.
- If there is an agreement between the parties to use the deposit or part of it as the final month’s rent, then the landlord should include it as income when the same is received.
Additional Rules & Regulations in Hawaii
Receipt Requirements: The landlord is not required to provide a receipt for the security deposit in Hawaii.
Security Deposit Holdings in Hawaii: Hawaii laws do not require landlords to hold security deposits separate from other funds.
Security Deposit Interest in Hawaii: Hawaii laws do not require landlords to provide interest on held security deposits.
New Property Owner’s Responsibility: If the original landlord decides to sell or transfer ownership of the rental property, the original landlord is required to provide the new landlord with an accounting of the security deposits at or before the time of the transfer. The new landlord has 20 days after the transfer to give the tenant a written notice of the amount of the security deposit that is now the new landlord’s responsibility (Haw. Rev. Stat. § 521.44 (f)). If the new landlord fails to satisfy the requirements of a transfer, it will be presumed that the tenant has paid a security deposit equal to one month’s rent or more, at the rate charged when the tenant originally rented the unit; the new landlord will be bound by this amount in all further matters relating to the security deposit.
For additional questions about security deposits in Hawaii, please refer to the official state legislation, Hawaii Landlord-Tenant Statutes