- Standard Limit / Maximum Amount: No limit (read more)
- What Can Be Deducted: Unpaid rent, cost of damage to the unit (not wear and tear), labor costs for landlord repair, advanced carpet cleaning costs, and any other reason mentioned in the lease agreement. (read more)
- Time Limit for Return: 31 days after the end of the lease. (read more)
- Penalty if Not Returned on Time: Double the withheld amount plus legal fees if required. (read more)
Purpose. Security deposits provide landlords with additional financial protection in the case that a tenant misuses the property or violates the lease agreement, causing financial damages to the property or landlord. This may include physical damage exceeding normal wear and tear, lease violations, and unpaid rent in some cases.
Legal Basics. Oregon landlords can charge any amount as a security deposit as long as it is listed in the lease agreement. The landlord must provide a receipt that states the amount of the deposit in addition to notice in the lease. The funds must be returned within 31 days of lease termination, otherwise the landlord will be liable for double the withheld sum in damages. This does not include normal wear and tear occurring as a result of regular usage.
Maximum Security Deposit Charge in Oregon
In Oregon, there are no limits on how much a landlord may charge as a security deposit (or pet fee) as long as it is stated in the lease agreement.
Landlords generally charge between one and two months’ rent as a security deposit. A landlord does have the option to increase the security deposit, but only after the first year after tenancy has begun. If the landlord decides to increase the security deposit, they must allow the tenant at least three months to pay the new deposit. If a tenancy is a week-to-week tenancy, the landlord may not increase the rent without giving the tenant written notice at least seven days prior to the effective date of the rent increase.
Additional Pet Deposits. Under Oregon’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.
Allowable Deductions on Security Deposits in Oregon
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:
- Unpaid rent;
- Costs of damage caused by the tenant’s failure to comply with obligations as a tenant but not those considered to be standard wear and tear;
- Carpet cleaning requiring more than a common vacuum cleaner (e.g. shampooing, cleaning or replacing the carpets, etc.); and
- Labor cost for cleaning and repairs by landlord at a fair rate.
Can the deposit be used by the tenant as last month’s rent?
The deposit may be used as the last month’s rent only if both parties agree in the lease agreement. Otherwise, the security deposit should be handled separately from any rent balance left outstanding.
“Normal Wear and Tear” vs. Damage in Oregon
- “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.
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 (this includes hazardous and possibly infectious waste such as needles and syringes);
- Keep the premises free from an accumulation of filth, rodents and vermin;
- Use all facilities (e.g. common areas, pools, etc.) and appliances (e.g. electrical, plumbing, heating, etc.) reasonably;
- Keep the premises safe from hazards of fire;
- Maintain smoke detection and/or carbon monoxide detection devices;
- Maintain and install storm water drain systems on the roof;
- Water, prune or mow any grass, trees or shrubbery on the premises as well as removing any leaves or fallen branches;
- Comply with the maximum number of persons allowed to occupy the premises;
- Leave the premises in the same condition it was in when it was handed to the tenant;
- Refrain from changing the locks on doors on the premises, except if necessary in an emergency;
- Not deliberately or negligently destroy, damage, or remove parts of the premises;
- Avoid unreasonably disturbing the neighbor’s peaceful enjoyment of the premises; and
- Not engage in illegal activities involving prostitution, gambling, use of alcohol or controlled or prohibited substances, and other similar or illegal activities, or in activities promoting the same within the premises.
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 Oregon
Time Frame: An Oregon landlord has 31 days to return any unused portion of the security deposit along with a written itemized list of damages deducted which states the basis of the claim. This period begins on the date of termination presented in the lease agreement, during which written notice should be hand-delivered or first-class mailed to the tenant’s forwarding address.
If the rental unit is deemed as unsafe by a governmental agency due to conditions that may affect the health or safety of the tenant, the landlord has 14 days to return the security deposit to the tenant after a notice of termination was delivered. The tenant has an option of choosing the method of delivery of the return of any money due. If the tenant fails to choose one of these methods, the landlord shall mail the tenant the security deposit.
Failure to Return Security Deposit as Required: If the landlord refuses or fails to return the security deposit within the 31-day limit or within a 14-day limit if the rental unit has been deemed unsafe, the tenant stands to recover up to the double the withheld funds, plus any legal fees associated with recovering the deposit in court. A tenant may file a claim with Oregon’s Small Claims Court up to a maximum amount of $10,000.
Security Deposits and Tax Filing in Oregon
Whether a security deposit will be treated as taxable or not depends on if the deposit is used or returned.
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 Oregon
Receipt Requirements: Oregon landlords are required to provide a written receipt that outlines the security deposit and any prepaid rent accepted at the beginning of tenancy.
Security Deposit Holdings in Oregon: Oregon laws do not require landlords to hold security deposits separate from other funds.
Security Deposit Interest in Oregon: Oregon laws do not require landlords to provide interest on held security deposits.
Last Month’s Rent Deposit: If the last month’s rent is collected at the beginning of tenancy, the landlord must apply it to the rent due at the time of termination whether it is due to early termination by the landlord or tenant or the end of a lease. It may not be retained as part of a security deposit but may be used to cover termination due to failure to pay rent.
Additional Deposits: During the terms of the current lease, the landlord may not impose additional security deposit fees without the tenant’s consent, such as a pet deposit for a new pet.
If imposing an additional security deposit after the first year of the lease term, the landlord should allow the tenant three months to pay the new deposit.
New Property Owner’s Responsibility: If the original landlord decides to sell or transfer ownership of the rental property, he or she must either transfer the security deposit to the new owner and notify the tenant of their contact information or return the deposit directly to the tenant and alert the landlord of the return.
For additional questions about security deposits in Oregon, please refer to the official state legislation, Oregon Landlord-Tenant Statutes