Landlords should familiarize themselves with the statewide regulations that govern security deposits in Missouri and understand their responsibilities.
Quick Facts for Missouri
- Maximum Amount: Cannot exceed 2 months’ rent
- Duration for Return: Within 30 days after termination of tenancy
- Penalty for Wrongful Withholding: Refund amount will be doubled
- Walk-Through Inspection: Required, with informed consent of & in presence of tenant
Purpose of a Security Deposit
Missouri defines security deposit as any deposit of money or property, which is provided by a tenant to a landlord to ensure the performance of any part of the rental agreement. This doesn’t include any money or property charged to a tenant for having a pet on the premises (MO Rev Stat § 535.300 (8)).
A security deposit refers to any money that is used to secure a tenant’s adherence to a rental agreement or any part of the rental agreement. A security deposit ensures that a landlord is compensated for losses caused by a tenant and may also incentivize tenants to adhere to their lease obligations in order to have their security deposit refunded at the end of the tenancy.
Allowable Security Deposit Charge in Missouri
Missouri landlords cannot charge a tenant a security deposit that is more than two month’s rent (MO Rev Stat § 535.300 (1)).
Security Deposit Rules & Regulations for Landlords in Missouri
- Storing Social Security Deposit: Landlords are required to hold a security deposit in a federally insured financial institution for the tenant.
- Security Deposit Interest: Security deposits do not have to be placed in an interest-bearing account, but a landlord can choose to do so. Any interest earned on a security deposit is the property of the landlord (MO Rev Stat § 535.300 (2)). This section doesn’t apply to a housing authority or any other government entity acting as a landlord.
- Allowable Deductions from Security Deposit: A Missouri landlord is allowed to make only specific deductions from a tenant’s security deposit. These include (MO Rev Stat § 535.300 (4)):
- Unpaid rent
- Damage to the rental unit in excess of normal wear and tear
- Damage related to early termination of the tenancy
- Other breach of the rental agreement
- Applying Security Deposit as Last Month’s Rent: A security deposit is not intended to be used to cover a tenant’s last month’s rent. A Missouri tenant may not use the security deposit as last month’s rent.
- How to Get a Full Refund: 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, all charges in the rental agreement are covered, and any financial loss from a breach of the contract is recovered by the landlord.
- Rental Unit Change Ownership: In Missouri, if the rental unit changes ownership, the landlord must do one of two things:
- Transfer the security deposit to the new owner, who becomes responsible for the handling of the security deposit. The landlord must notify the tenant in writing of the transfer.
- Return all or a portion of the deposit back to the tenant directly.
Returning Security Deposits in Missouri
- Time Frame: A landlord must return a tenant’s security deposit within thirty days after the tenancy has been terminated (MO Rev Stat § 535.300 (3)).
- No Deductions: If the landlord hasn’t made any deductions from the security deposit, the full amount of the security deposit must be returned to the tenant.
- Deductions: If the landlord has made deductions from the security deposit, he/she must provide the tenant with a written itemized list of the specific damages and the amount charged for each for which all or a portion of the security deposit is withheld. Any remaining balance of the security deposit must also accompany the statement.
The landlord should mail the statement and any payment to the tenant’s last known address.
- Walk-through Inspection After Move-out: Missouri landlords are required to perform a walk-through inspection after the tenant vacates the rental unit. The landlord must give the tenant notice in writing of the date and time when he/she will inspect the rental unit after the termination of the rental agreement. The notice should be sent to the tenant’s last known address or be delivered in person. The inspection must be done in a reasonable time. It is the tenant’s right to be present when the walk-through inspection is performed (MO Rev Stat § 535.300 (5)).
- Wrongful Withholding of the Security Deposit: If a landlord wrongfully withholds all or any portion of a tenant’s security deposit, the tenant has a right to recover twice the amount of security deposit withheld (MO Rev Stat § 535.300 (6)). This award doesn’t apply to tenants of commercial property.
“Normal Wear and Tear” vs. Damage in Missouri
- “Normal wear and tear” is defined as 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 invitees or 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 Missouri
A security deposit can either be held to cover losses suffered by the landlord or refunded to the tenant, all or in part. What 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.
The Law on Security Deposits in Missouri
If you are interested in reading the text of Missouri’s security deposit law, please see Missouri Revised Statutes § 535.300.
Tips for Missouri Landlords on the Right Practices for Security Deposits
- Charge tenants a security deposit amount that is not more than two month’s rent
- Return security deposits within 30 days of tenancy termination
- Withhold security deposits for unpaid rent, damages and cost related to a breach of lease agreement
- Expect to pay twice the amount of the deposit for wrongful withholding
- Seek damages in legal proceedings if the security deposit is insufficient to cover the losses caused by the tenant
The state’s security deposit statute is aimed to protect both landlords and tenants. It’s also there to hold them accountable as well. Both Missouri landlords and tenants should learn about the security deposit law that govern the state. Stay up-to-date on the security deposit laws of the state since changes can be made periodically.
Make sure to refer to the Missouri Annotated Statutes § 535.300 for more on security deposits. Landlords should educate themselves on this topic to protect their rental property and avoid any legal trouble.
Other Resources for Missouri Landlords & Tenants
- Missouri Eviction Process
- Missouri Squatter’s Rights
- Missouri Residential Lease Agreement Template