In Oregon, the collection and return of security deposits are primarily regulated under the OR Rev Stat § 90.300. These laws provide a set of rules that Oregon landlords and property managers have to follow to protect all parties.
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. However, the landlord may not require the tenant to pay additional deposits unless both parties agree to modify the lease. In that case, the additional security deposit must relate to that modification. The landlord may not increase rent for a week-to-week tenancy without giving the tenant written notice at least seven days prior to the effective date of the rent increase.
Additional Pet Deposits. Under Oregon law, the landlord may ask for an additional pet deposit. The landlord may not charge additional security deposits or pet fees for service animals or emotional support animals. However, the tenant is liable for damages to the rental unit caused by the service animal or emotional support animal.
The Federal Fair Housing Act prohibits discrimination based on an individual’s disability and requires landlords to allow tenants who use service dogs or emotional support animals to have an equal opportunity to use and enjoy their home.
Allowable Deductions on Security Deposits in Oregon
After the tenant has vacated the premises, the landlord may use the security deposit to make deductions for:
- 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.).
- Labor cost for cleaning and repairs by landlord at a fair rate.
Can the landlord use the deposit as the last month’s rent?
A landlord may only use the security deposit as the last month’s rent if both parties agree to do so in the lease agreement.
“Normal Wear and Tear” vs. Damage in Oregon
- “Normal Wear and Tear” is deterioration that occurs as a result of normal use. Normal wear and tear does not include damages caused by 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 generally includes minor issues. For example: gently worn carpets, loose door handles, fading wall paint, stained bath fixtures, or lightly scratched glass. Such wear and tear occurs naturally as a result of proper use.
- “Damage” is destruction to the rental unit that occurs because of the abuse or negligence of a tenant. Damage may affect usefulness, value, or 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 tenant’s failure to comply with specific obligations. To comply with these obligations, the tenant must:
- Keep the premises, including all plumbing fixtures, clean and safe.
- Dispose of waste in a clean and safe manner (including hazardous or 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 the tenant received it in.
- 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.
- 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.
The landlord may deduct the cost of repairing damage to the premises from the security deposit if the tenant caused the damage by failing to comply with any of the above.
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 set forth in the lease agreement. The landlord should hand deliver these documents or mail them first-class to the tenant’s forwarding address.
However, the landlord must return the security deposit within 14 days after a notice of termination if a government agency deems the rental unit as unsafe due to conditions that may affect the health or safety of the tenant. 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 may recover up to the double the withheld funds, plus any legal fees associated with recovering the deposit in court. A tenant may only file a claim of up to $10,000 with Oregon’s Small Claims Court.
Security Deposits and Tax Filing in Oregon
Whether the landlord should treat a security deposit as taxable income depends on how the landlord uses the deposit.
Taxable Income: The landlord is not automatically required to claim a security deposit as taxable income. Security deposits only become taxable income when the landlord no longer has any obligation to refund them. At this point they may also qualify as a write-off for tax purposes as well.
Reporting Security Deposit as Income: Below are three simple rules the IRS has suggested for landlords to follow when deciding if a security deposit should be reported as income:
- The landlord should declare the security deposit as income if the tenant forfeits the deposit due to a breach of the lease or for unpaid rent.
- When the landlord uses the security deposit to cover appropriate expenses then the landlord should claim the amount used as income. If the landlord does not include the cost of repairs as expenses as a matter of practice, then there is no need to include the part of the deposit kept to cover them as income.
- The landlord should include the deposit as income upon receipt if there is an agreement between the parties to use the deposit or part of it as the final month’s rent.
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 landlord collects the last month’s rent at the beginning of tenancy, the landlord must apply it at the time of termination. 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: The landlord cannot require additional deposits without the tenant’s consent. 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 landlord decides to sell the rental property, the landlord must properly handle the security deposit. The landlord may transfer the security deposit to the new owner and notify the tenant of their contact information. Otherwise, the landlord may return the deposit directly to the tenant and alert the new landlord of the return.
For additional questions about security deposits in Oregon, please refer to the official state legislation, Oregon Landlord-Tenant Statutes.