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LEGAL OPINION
Security Deposits, Nonrefundable Fees and Abandonment
The purpose of this article is to clarify the different purposes, procedures and requirements between "security deposits" and "nonrefundable fees", especially in the context of tenant abandonment of the residential rental property.
Security deposits are defined by statute as any moneys "paid to the landlord by the tenant as a deposit or security for performance of the tenant's obligations in a lease or rental agreement." RCW 59.18.260. The purpose of a security deposit is to insure against a tenant's breach of the terms of the rental agreement. The deposit does not belong to the landlord unless the tenant breaches, and then the landlord can use only the portion of the deposit that will compensate for the breach. For example, the tenant pays a $500 "damage deposit" and causes $200 of damage. The landlord can only appropriate $200 and must refund the balance of $300 to the tenant. Unlike, "nonrefundable fees", "security deposits" must be refundable.
The Residential Landlord-Tenant Act sets forth the following requirements for rental agreements that require security deposits:
The rental agreement must be in writing and must contain the terms and conditions under which the deposit or portion of the deposit may be withheld;
A written checklist or statement describing the condition, cleanliness and existing damage must be provided to the tenant at the commencement of the tenancy;
The checklist or statement must be signed and dated by the landlord and the tenant;
The tenant must be provided with a copy of the signed checklist or statement; and
The deposit cannot be withheld for ordinary wear and tear resulting from the ordinary use of the premises.
RCW 59.18.260.
Requiring the payment of "first and last months' rent" at the commencement of the tenancy is not really a "deposit", because the full amount unconditionally belongs to the landlord. The "last months' rent" should not be used as a "security deposit". It's proper use is to insure payment of the last months' rent, especially when the tenancy terminates midterm such as a tenant abandonment. The best practice is to have a clause in the rental agreement separate from the "security deposit" clause that addresses any required advance payment of rent. The rental agreement should designate the advance payment of rent as a "sum" or an "amount". The rental agreement should state that the payment of the advanced amount is for application to the last month's rent and that no portion of the amount is refundable. (See nonrefundable fees below.)
Nonrefundable Fees are allowed under the Residential Landlord-Tenant Act. However, nonrefundable fees may not be designated as a "deposit". RCW 59.18.285 states, "If any monies are paid to the landlord as a nonrefundable fee, the rental agreement shall be in writing and shall clearly specify that the fee is nonrefundable."
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What People in the know are saying about ORCA:
"We are so impressed with your service and the great presentation you gave at Family Tree last week. Thanks for all your hard work. We look forward to doing business with you in the coming New Year!"
- Dave & Lora Stoecke, Ferndale Apartments
"Rebekah & the Orca Gang - We sure appreciate your informative & useful
Newsletter!
- Landmark Property Management
"Thanks for your great service in 2001! Look forward to working with you in 02'."
- John Doney, Townsend Bay Property Management
"Loved your newsletter, the abandonment notice may be helpful"
- Cindy Smith, Ferndale WA
"Thank you all for all your help & patience in answering all my questions."
- Elizabeth/Arlington Apartments
"Thank you so much for your generous support of the Leukemia & Lymphoma Society and my marathon goal. My team raised almost $300,000 to fight leukemia!"
- Kristin Pauls, Ad-West Realty
"Thank you for your generous donation to the Brandon Koetje Memorial Scholarship Fund. We raised over $200 for this Fund at the Golf Tournament Raffle."
- North Puget Sound Association of Realtors
"Dear Rebekah and the Orca Pod, the flower arrangement was beautiful. It was very thoughtful and much appreciated. We hope you have a great year."
- the Westwood Gang
"Thank you for your generosity to NARPM and the vendor fair. The treasury and winning table participants thank you very much for your regular and anticipated prize contribution. The stuffed Orca whale is an enjoyable contribution to the meetings."
- Twila Meaker
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NARPM 2002 MID YEAR CONFERENCE
"BLAZING NEW TRAILS"
Don't Miss This!
PORTLAND, OREGON / APRIL 16TH - 20TH
The National Association of Residential Property Managers will be holding their 2002 Mid Year Conference in the beautiful "City of Roses," Portland Oregon. There will be two MPM & RMP Classes on April 16th & 17th for those of you who are interested in pursuing your designation. The beginning of the Conference will start off with registration from 8 AM- 5 PM on Thursday, April 18th which is also NARPM Development Day. There will be six great classes you can take from 1 - 2:15 PM on Chapter Officers Training, Committee Chairs Training, Ideas for State Chapters, How To Become a National Board Member, How to Earn Your Designation and How to Use NARPM to Make Your Business Grow. You'll learn how to blaze your own trail, instead of waiting for others to clear the path.
The conference is open to everyone, whether you are a private landlord, real estate sales agent or an investor. For more information about the conference, please visit our web site at
www.NARPM.org or you can contact
NARPM headquarters at 1-800-782-3542 or April at Tara Properties, 360-331-7100.
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