Security Deposits in Washington

Washington State landlords may require a security deposit from tenants when entering a lease agreement. It provides landlords with a bit of a cushion when they experience financial losses as a result of tenants’ breach of contract. It’s crucial for landlords to adhere to the security deposit law that governs the landlord-tenant relationship.

Quick Facts for Washington

  • Maximum Amount: No limit
  • Duration for Return: 14 days after end of lease
  • Other Return Requirements: Itemized list of any damages
  • Penalty for Late Returns: Landlord will return full deposit

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 Washington

Washington State has no established maximum amount that a landlord can charge a tenant for a security deposit. 

Written Rental Agreement 

If a tenant pays a deposit, it must be present in writing in the lease/rental agreement and must include the terms and conditions under which the deposit or any portion of it may be withheld by the landlord when the lease/rental agreement is terminated. A landlord cannot collect a deposit unless the rental agreement is in writing and a written checklist or statement specifically describing the condition and cleanliness of or existing damages to the premises and furnishings is provided to the tenant by the landlord at the beginning of the tenancy. The checklist or statement must be signed and dated by the landlord and the tenant, and the tenant must receive a copy. Deposit cannot be withheld for normal wear and tear (RCW 59.18.260).

Nonrefundable Fees

Non-refundable money paid to the landlord cannot be designated as a deposit or as part of any deposit, and should be clearly stated in the rental agreement as nonrefundable. The landlord is liable to the tenant for the amount of nonrefundable fees collected if he/she fails to give the tenant a written rental agreement. If the written rental agreement fails to specify that the fee is nonrefundable, the fee must be treated as a refundable deposit (RCW 59.18.285).

Storing Security Deposit

Landlords should promptly deposit security deposits in a trust account, financial institution or licensed escrow agent located in Washington. The landlord is entitled to a receipt of interest paid on the trust account deposits unless other agreement is established in writing. The landlord must give the tenant a written receipt for the deposit and a written notice of the name and address and location of the depository and any changes that occur later (RCW § 59.18.270).

Security Deposit Receipt

A landlord must provide a tenant with a receipt for any payment made in the form of cash; or provide when requested by a tenant, a written receipt for any payments made in a form other than cash (RCW 59.18.063).

Copy of Written Rental Agreement

The landlord must provide each tenant who signs the rental agreement with a copy if there is a written rental agreement for the premises; the tenant may request one free replacement copy during the tenancy (RCW 59.18.065).

Returning Security Deposit

Landlords must follow certain procedure when returning a tenant security deposit (RCW 59.18.280 (1)(a) (b):

  • Time Frame: Within 14 days after the termination of the rental agreement and vacation of the premises or, within 14 days after the landlord learns of the tenant’s abandonment of the premises, the landlord must give a full and specific statement of the reasons the deposit is withheld, plus any remaining refund owed to the tenant. A landlord cannot retain security deposit to cover normal wear and tear.
  • Delivery: Compliance by the landlord requires delivery of the statement or payment, or both, to the tenant personally or deposited in the United States mail properly addressed to the tenant’s last known address with prepaid,first-class postage within the twenty-one days.

 

 

Landlord Fails to Comply

If the landlord fails to provide the tenant with a statement of deductions, plus any refund owed the tenant within the 21-day period, he/she will be liable to the tenant for the full amount of the deposit. The landlord cannot seek to take action against the tenant to recover the deposit, unless the landlord can show specific circumstances that were beyond his/her control that prevented the delivery of the statement or refund within the twenty-one days, or that the tenant abandoned the premises

  • Court Action: The court may award the tenant up to two times the amount of the deposit if the landlord intentionally refused to give the statement or refund owed. In a court action brought by the tenant to recover the deposit, the successful party is entitled to court costs and reasonable attorneys’ fees (RCW 59.18.280 (2).

Damage Exceed Security Deposit

A landlord has the right to take action against a tenant if the tenant’s damage to the property is more than the amount of the tenant’s security deposit or damage deposit, and for reasonable attorneys’ fees (RCW 59.18.280(2)).

Allowable Deductions

Washington State landlords may deduct from a tenant’s security deposit the following:

  • Non-payment of rent’
  • The cost of damage to property beyond normal wear and tear 
  • Charges that the tenant is legally liable under the lease agreement 

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

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 during the course of a tenancy the ownership of the rental unit changes, any money in the deposit trust account that is affected by the change must be transferred to an equivalent trust account of the new landlord. The new landlord must promptly notify the tenant of the transfer and of the name, address and location of the new depository. If, during the tenancy, the tenant’s rental unit experiences a foreclosure and the tenant’s deposit is not transferred to the new owner after a sale or transfer, the foreclosed-upon owner should immediately refund the full deposit to the tenant after the foreclosure sale or transfer. If this is not done, he/she is liable to the tenant for damages up to twice the amount of the deposit, plus many any court costs or reasonable attorneys’ fees awarded by the court (WRC § 59.18.270).

Tips for Washington State Landlords on the Right Practices for Security Deposits

  • Charge tenants a security deposit amount that is appropriate in the absence of a statutory limit
  • Return a tenant’s security deposit within 14 days after the termination of the rental agreement and vacation of the premises or, within 14 days after the learning of the tenant’s abandonment of the premises
  • Withhold security deposits for rent owed, the cost of damage to property beyond normal wear and tear
  • Seek damages in legal proceedings when a tenant acts in bad faith and breach the rental agreement

It’s essential that both landlords and tenants understand the ins and outs of the state’s security deposit law. Landlords have a responsibility to stay in compliance with Washington State’s security deposit statutes. Tenants should stick to their lease obligations during their tenancy. Washington State security deposit law can be found in RCW 59.18.260, 59.18.270, 59.18.280 and 59.18.285

Read About Security Deposits in Other States

Arizona

Colorado

Delaware

Georgia

Hawaii

Idaho