Generally, a security deposit is relevant when landlords and tenants are entering a lease agreement. Both landlords and tenants should know Oregon’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 Oregon
- Maximum Amount: No limit
- Duration for Return: 31 days after end of lease
- Penalty for Late Returns: Twice the refund deposit amount, plus 7% interest
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 Oregon
The state of Oregon has no established maximum amount that a landlord can charge a tenant for a security deposit.
Security Deposit Receipt
Landlords are required to provide tenants with a receipt for any security deposit paid and the amount should be stated in the lease agreement (ORS 90.300(2)).
Returning the Security Deposit
Oregon landlords must follow certain procedures when returning a tenant’s security deposit (ORS 90.300(12)):
- Time-frame: Landlords are required to return security deposits, minus any deductions, within 31 days of tenancy termination.
- Itemized Statement: The landlord must include a written, itemized list of all deductions, the reason for the deductions.
- Delivery: Landlords must deliver the security deposits directly to tenants or send them by first-class mail to a tenant’s last known address.
Landlords can keep all, or a portion of a tenant’s security deposit to cover the following deductions (ORS 90.30(7(a)(A)(B)); (ORS 90.30(7(b)); (ORS 90.30(7(c)(A)):
- Unpaid Rent
- Damage in excess of normal wear and tear
- Labor costs for cleaning and repair done by landlord
- Carpet cleaning requiring more than the common vacuum cleaner
- Other breaches of the lease agreement
Failure to Comply with Return Requirements
If a landlord fails to provide a written accounting of the deductions or withholds a security deposit, all or in part, in bad faith, the tenant may recover the deposit due in an amount equal to twice the amount withheld (ORS 90.30(16)).
Last Month’s Rent Deposit
If a last month’s rent deposit is established in the rental agreement, the landlord must apply it to the rent due for the last month of the tenancy when either the landlord or the tenant gives a notice of termination, (ORS 90.30(9)(a)).
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, the landlord is responsible for returning all tenants’ security deposits. The landlord can choose to (ORS 90.30(2)(b)):
- 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; or
- Return the deposits to the tenants directly and notify the new owner that the security deposit has been returned to the tenants.
Tips for Oregon 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 31 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 Oregon’s security deposit. 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. Oregon security deposit statutes can be found in OR Rev Stat § 90.300.