- Standard Limit / Maximum Amount: 2 months’ rent (read more)
- What Can Be Deducted: Unpaid rent, utilities, charges under the lease and cost of damage to the unit (read more)
- Time Limit for Return: 45 days (read more)
- Penalty if Not Returned on Time: The amount withheld plus damages, costs of suit and reasonable attorney’s fees (read more)
- Tenant’s Deadline to Claim Funds: 1 year + 45 days from end of lease (read more)
Purpose. Security deposits are like safety nets. They ensure compensation for any loss that the landlord might incur because of the tenant’s acts. It covers for incidents like damage to the property, termination of the lease without notice or non-payment of rent.
Legal Basics. Virginia landlords can demand a maximum of two months’ rent as security deposit from which unpaid rent, utilities, charges under the lease and cost of damages incurred may be deducted. It must be returned within 45 days from the end of the lease. Otherwise, the landlord may be made to return the security deposit and pay the costs of suit.
Maximum Security Deposit Charge in Virginia
In Virginia, landlords cannot charge a tenant security deposit that is more than two months’ rent.
Allowable Deductions on Security Deposits in Virginia
Virginia landlords can deduct the following from the security deposit:
- unpaid rent with reasonable late payment charges if specified in the lease;
- loss or damage due to the tenant’s noncompliance with tenant obligations;
- charges allowed under the rental agreement; and
- damages for breach of the rental agreement.
- unpaid utilities
To clarify item number 2 in the above list, the damages will include only costs and losses in excess of normal wear and tear (read more). Also, if the damage to the unit costs more than the security deposit, the landlord can notify the tenant of this fact within the same 45-day period. Doing so will allow the landlord another 15 days to provide the tenant with the itemized list of deductions.
Can the security deposit be used as payment for the last month’s rent? Not usually. Tenant’s in Virginia are not entitled to do this but it can be done if there is a written agreement between the parties to do so.
Deducting for Utilities
Virginia landlords may withhold part of the security deposit to cover water, utility and other bills on the unit if the landlord provides the tenant notice of the latter’s rights and duties regarding the security deposit in the termination notice, a notice confirming the date of termination or a separate notice given at least 15 days before making use of the security deposit.
The landlord must provide the tenant with the payment confirmation for the utilities within 10 days of making the payment along with the remainder of the amount withheld if there are any. If the tenant provides the landlord with proof of having paid the utilities, the landlord is required to refund the amount withheld for the same.
Deductions During the Tenancy
Where deductions from the security deposit are allowed during the tenancy (e.g. those allowed under the lease), the landlord is required to notify the tenant of the same within 30 days of the day that the amount of the said deduction was determined.
“Normal Wear and Tear” vs. Damage in Virginia
- “Normal wear and tear” is the deterioration that occurs from the intended use of the rental property and without negligence, carelessness, accident, misuse, or abuse of the premises or its contents by the tenant, household members, or guests on the premises. This includes 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 was intended to be used.
- “Damage” refers to the destruction that occurs because of abuse or negligence by the tenant during the course of the tenancy and can 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.
Returning Security Deposits in Virginia
Timeframe: The landlord has 45 days from the end of the lease to return the tenant’s security deposit. If the landlord has made any deductions, the landlord must provide the tenant with a written notice containing an itemized list of the deductions together with the balance of the security deposit after deductions. This may be delivered by the landlord to the tenant personally or by sending it by mail to the tenant’s forwarding address.
Failure to Return the Security Deposit as Required: If the landlord fails to return the security deposit or what’s left of it within the time allowed, the landlord may be made to pay back the entire security deposit to the tenant plus damages, costs of suit and reasonable attorney’s fees as penalty. However, if the tenant owes rent, the court will order for an amount equal to the security deposit withheld to be credited against the rent owed by the tenant.
Failure of the Tenant to Provide a Forwarding Address: If the tenant fails to provide a forwarding address, the landlord will only be required to keep the security deposit held for the tenant for a period of 1 year from the end of the 45-day period in which the landlord is required to return the security deposit. After that, the landlord may be relieved from responsibilities relating to the security deposit by turning it over to the State Treasury as unclaimed property.
Security Deposits and Tax Filing in Virginia
How the security deposit will be treated tax-wise depends on whether or not the landlord gets to keep it (or part of it).
Taxable income: Security deposits are not automatically considered income when the landlord receives them. The IRS advises to not include security deposits as income if the landlord may still be required to return the same. They only become taxable income when the landlord no longer has any obligation to refund them. For example, if the security deposit was given in 2019 but was only forfeited in 2020, then the landlord should only include it as income in 2020.
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 3 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 Virginia
Receipt Requirements: The landlord is not required to provide a receipt for the security deposit in Virginia.
Record-Keeping Requirements: The landlord is required to keep a record of all deductions made to the security deposit for up to the last 2 years and to allow the tenant or the latter’s representative to inspect the same during normal business hours.
Security Deposit Interest in Virginia: Virginia laws no longer require landlords is not required to pay interest on security deposit.
Inspection at the End of the Tenancy: At the end of the tenancy, when the landlord requests the tenant to vacate the premises or within 5 days of receiving notice of the latter’s intent to vacate, the landlord must notify the tenant in writing of the latter’s right to be present at when the landlord conducts the inspection of the unit to determine the deductions on the security deposit. If the tenant want’s to be present at the inspections, the tenant must inform the landlord in writing.
The inspection must be done within 72 hours of the tenant’s moving out date. After the inspections, the landlord must provide the tenant with an itemized list of damage found during the move-out inspection. The landlord is not barred from charging for damage discovered after the move-out inspection, but the itemized list of damage from the move-out inspection may be used to dispute them.
New Property Owner’s Responsibility: If the rental property is sold while the lease subsists, the buyer inherits the previous owner’s obligation to refund the tenant’s security deposit when the lease ends. Therefore, the buyer should make sure to procure the security deposit and the proper accounting for the same from the previous owner.
For additional questions about security deposits in Virginia, please refer to the official state legislation, Virginia Code § 55.1-1226 for more information.