Generally, a security deposit is relevant when landlords and tenants are entering a lease agreement. Both landlords and tenants should know Oklahoma’s security deposit law that governs the landlord-tenant relationship. The state’s security deposit law lends specific protections to both landlords and tenants.
Quick Facts for Oklahoma
- Maximum Amount: None
- Duration for Return: 45 days after end of lease
- Penalty for Late Returns: Refund deposit amount plus damages
- Deadline to Claim Funds: Within 6 months
The Purpose of a Security Deposit
Security deposits serve as a safety net for landlords should they suffer financial losses caused by the tenant doing damage to the rental property, or a breach of the lease agreement, or unpaid rent.
Security Deposit Maximum in Oklahoma
The state of Oklahoma has no established maximum amount that a landlord can charge a tenant for a security deposit.
Storing Security Deposit
A landlord is required to place all security deposits in an escrow account, in a federally insured financial institution in Oklahoma. Misappropriation of the security deposit is unlawful and punishment can amount to roughly six (6) months in a county jail and a fine that is twice the amount misappropriated from the escrow account (OK Stat § 41-115 (A)).
Returning the Security Deposit
Oklahoma landlords must follow certain procedures when returning a tenant’s security deposit:
- Itemized Statement: When the tenancy is terminated, if the landlord intends to make any deductions from the deposit and earned interest, he/she must include a written, itemized list of each deduction, the reason for the deduction and the charge for each.
- Delivery: The statement should be delivered by mail, with return receipt requested and signed for by any individual who is of the statutory service age at the address provided, or in person to the tenant.
- Time-frame: If deductions are made, the landlord should return the balance of the security deposit within 45 days after the termination of tenancy, delivery of tenant’s possession and written demand by the tenant. If the tenant does not demand their security deposit in writing within 6 months after termination of the tenancy, the landlord can claim the deposit for the cost and burden of maintaining the escrow account (OK Stat § 41-115 (B)).
Landlords can keep all, or a portion of a tenant’s security deposit to cover the following deductions:
- Unpaid Rent
- Damage in excess of normal wear and tear
- Other breaches of the lease agreement
Failure to Comply with Return Requirements
If a landlord fails to comply with the security deposit return requirements, the tenant may recover damage and the security deposit (OK Stat § 41-115 (E)).
Last Month’s Rent
A security deposit is not intended to be used to cover a tenant’s last month’s rent, but the provision can be established in the rental agreement.
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, all charges in the rental agreement are covered.
Security Deposits and Tax Filing
What happens to the deposit at the end of the tenancy determines how it is treated for tax purposes.
- Accounting for Security Deposits: Security deposits are treated as either assets or liabilities when filing taxes. Tenants shouldn’t deduct security deposits as expenses and landlords shouldn’t declare them as income when in escrow intended to be returned to the tenant.
- Security Deposit Write-off: If a landlord withholds part or all of the security deposit for losses, that amount should be included as income when filing taxes. Forfeited deposits should be declared as income.
“Normal Wear and Tear” vs. Damage
- “Normal wear and tear” is deterioration that occurs as a result of everyday use of the rental unit, and without negligence, carelessness, accident, or misuse or abuse by the tenant.
- “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.
Property Change Ownership
If a rental property changes ownership, an Oklahoma landlord must do one of two things within a reasonable time (OK Stat § 41-115 (V)):
- 1. Transfer the tenant’s security deposit to the new owner and notify the tenants in writing of the transfer and of the new owner’s name and address
- 2. Return the deposits to the tenants directly and notify the new owner that the security deposit has been returned to the tenants.
Tips for Oklahoma Landlords on the Right Practices for Security Deposits
- Charge tenants a security deposit amount that is appropriate in the absence of a statutory limit
- Provide tenants with an itemized list of deductions and the cost of each
- Return security deposits within 45 days of tenancy termination
- Withhold security deposits for unpaid rent, damage and other costs related to a breach of the lease agreement
- Seek damages in legal proceedings if the security deposit is insufficient to cover the losses caused by the tenant
It’s beneficial for both landlords and tenants to know and understand Oklahoma’s security deposit law. Landlords are required to remain in compliance with the state’s security deposit law. Tenants have a duty to adhere to their lease obligations, and in so doing, can get a refund of their security deposit at the end of their lease term. Oklahoma security deposit statutes can be found in OK Stat § 41-115.