Every Rhode Island landlord should know the proper procedures for handling security deposits. Compliance is key, and every landlord should know how to avoid noncompliance. Tenants also have a responsibility to perform their lease obligations.
Quick Facts for Rhode Island
- Maximum Amount: No more than 1 month’s rent
- Duration for Return: 20 days after end of lease
- Penalty for Late Returns: Twice the refund deposit amount, plus any attorney fees
The Purpose of a Security Deposit
Security deposits serve as a safety net for landlords should they suffer financial losses caused by the tenant, who may have damaged the rental property, or breach the lease agreement, or skipped on the rent.
Security Deposit Maximum in Rhode Island
A landlord can charge a security deposit equal to the amount of one month’s rent and no higher (RI Gen L § 34-18-19 (a)).
Returning the Security Deposit
Rhode Island landlords must follow certain procedures when returning a tenant’s security deposit (RI Gen L § 34-18-19 (b)):
- Written Itemized Statement: At the end of the tenancy, the landlord is required to present a tenant with a written notice of the itemized list of deductions from the deposit and the charge for each.
- Time-frame: Landlords must return a tenant’s security deposit, minus any deductions, within twenty (20) days after the termination of the tenancy, delivery of possession, or the tenant’s providing the landlord with a forwarding address, whichever occurs last.
Failure to Comply With Return Requirements: If a landlord fails to comply with the return requirements, the tenant may recover the deposit amount due, plus damages that is double the amount wrongfully withheld, along with reasonable attorney fees (RI Gen L § 34-18-19 (c)).
Landlords can hold all, or a portion of a tenant’s security deposit and interest for the following reasons (RI Gen L § 34-18-19 (b)):
- Unpaid rent
- Cleaning expenses
- Reasonable trash disposal expenses
- Physical damages beyond ordinary wear and tear
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
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 new owner must adhere to the state’s security deposit law if the tenant’s security deposit is transferred to him/her (RI Gen L § 34-18-19 (d)).
Tips for Rhode Island Landlords on the Right Practices for Security Deposits
- Charge tenants no more than one month’s rent for the security deposit
- Provide tenants with an itemized list of deductions and the cost of each
- Return security deposits within 20 days of tenancy termination
- Withhold security deposits for unpaid rent, physical damage, cleaning costs, trash disposal expenses 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
Security deposits are an important part of the leasing process and helps to protect landlords and tenants alike. It’s essential for landlords and tenants to know how the security deposit law of the state applies to them. Stay informed and aware of any changes to Rhode Island’s security deposit law, which can happen over time. The relevant Rhode Island security deposit statute(s) can be found at RI Gen L § 34-18-19.