Landlords should familiarize themselves with the statewide regulations that govern security deposits in Louisiana and understand their responsibilities.
Quick Facts for Louisiana
- Maximum Amount: No set limits
- Duration for Return: Within 1 month of lease termination
- Deadline to Provide Itemized Damage Statement: Within 1 month of lease termination
- Penalty for Late Returns: $300 or double the amount wrongfully withheld, whichever is greater
Purpose of a Security Deposit
The purpose of a security deposit is to serve as a safety net for landlords if they suffer financial losses that may have been caused by damages to the rental property, unpaid rent or other breaches of the lease agreement. A security deposit ensures that a landlord is compensated for losses and may also incentivizes tenants to adhere to their lease obligations in order to have their security deposit returned at the end of the lease term.
Allowable Security Deposit Charge in Louisiana
Louisiana doesn’t have a set limit on the amount that a landlord can charge a tenant for the security deposit.
Security Deposit Rules & Regulations in Louisiana
- Storing Security Deposit: There are no statutes in the state of Louisiana regarding how a landlord should store a tenant’s security deposit.
- Allowable Deductions From Security Deposit:Louisiana landlords are allowed to make certain deductions from a tenant’s security deposit, including:
- Unpaid rent
- Damage in excess of normal wear and tear
- Charges needed to remedy any defaults of the tenant, such as unpaid utility bills and abandonment of rental unit
- Other breaches of the lease agreement
- Applying Security Deposit as Last Month’s Rent: A security deposit is not meant to be used as the tenant’s last month’s rent. The security deposit is intended to be used to cover damages/losses caused by a tenant and wouldn’t simply be used to cover tenants’ last month’s rent if the tenant vacates without paying. Unless otherwise explicitly written in the lease agreement, a tenant cannot use the security deposit to cover last month’s deposit.
- How to Get a Full Refund of Security Deposit: At the end of the tenancy, a full security deposit can be returned to the tenant if there is no damage to the rental property, rent is paid in full, charges in the rental agreement are covered and the tenant has not defaulted on any lease obligations.
- New Property Owner’s Resposibility: LA Rev Stat § 9:3252 (B) maintains that in the event that the rental property is transferred to a new owner during the term of a lease, the landlord must also transfer the security deposit. When the transfer is completed, the landlord is relieved of liability for the security deposit, and the new owner is responsible for returning the tenant’s deposit when the lease is terminated.
Returning Security Deposits in Louisiana
The landlord has a right to retain all or a portion of the security deposit to go towards any default on the part of the tenant or to fix damages to the rental property that is not caused by reasonable wear and tear. The tenant is responsible for providing the landlord with a forwarding address where the security deposit is to be delivered.
- Time Frame: LA Rev Stat § 9:3251 (A) establishes that a Louisiana landlord must return the tenant’s security deposit within one month of the lease termination.
- Itemized Statement: If a landlord is withholding a portion of the security deposit, he/she is required to provide the tenant with an itemized written statement of the deductions, including what the issues are and the exact charge associated with each. This statement should be delivered within a month of the lease termination, which is the same time period for delivering the remainder of the security deposit.
- Failure to Return the Security Deposit: As established in LA Rev Stat § 9:3252 (A), if a Louisiana landlord fails to return a tenant’s security deposit within the required time-frame, or wrongfully withholds a portion of it, the landlord could be liable to pay $300 or twice the amount of the portion of the security deposit wrongfully withheld, whichever is greater. It is considered willful failure if a landlord fails to return the security deposit within thirty days after written demand for a refund.
Furthermore, a Court may award costs and attorney’s fees to a tenant if a landlord is sued for wrongful withholding the tenant’s security deposit.
- Exception: If a tenant abandons the premises, without giving notice as required or before the termination of the lease, the landlord is not obligated to refund the security deposit to the tenant (LA Rev Stat § 9:3251 (C)).
“Normal Wear and Tear” vs. Damage in Louisiana
- Normal wear and tear” is deterioration that occurs as a result of use for which the rental unit is intended and without negligence, carelessness, accident, or misuse or abuse of the premises or contents by the tenant or members of his household, or their guests.
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.
Security Deposits and Tax Filing in Louisiana
A security deposit can either be held to cover losses suffered by the landlord or all or a portion be refunded to the tenant. What happens to the security deposit when the lease is terminated depends on whether it is refunded or it is withheld by the landlord.
- 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.
The Law on Security Deposits in Louisiana
Louisiana security deposit law is Louisiana Revised Statutes Annotated §§ 9:3251 to 9:3253.
Tips for Louisiana Landlords on the Right Practices for Security Deposits
- Use your discretion and charge a reasonable amount for security deposits since no statutory limit is established.
- Return security deposits within one month of the lease termination
- Avoid legal action from the tenant by mailing the tenant an itemized list of deductions and any remaining security deposit at the required time
- Withhold security deposits for reasons such as damage in excess of normal wear and tear and default on the part of the tenant that amounts to financial loss
A landlord has the right to require a security deposit from a tenant when entering a lease agreement. It helps both landlords and tenants to become familiar with the security deposit law in Louisiana in order to settle disputes. Landlords can protect their assets, while tenants can protect their rights and seek to be treated fairly. Staying up-to-date on Louisiana’s security deposit law for any changes is important.
Make sure to refer to the Louisiana Revised Statutes Annotated §§ 9:3251 to 9:3253 for more on security deposits. Landlords should educate themselves on this topic to protect their rental property and avoid any legal trouble.