Security Deposit Checklist

Walk every room with the tenant present — kitchen, baths, bedrooms, closets, exterior. Note paint, carpet, fixture, and appliance condition on the move-in inspection form. The signed walk-through is the baseline that every move-out deduction will be measured against; without it, deposit deductions are nearly indefensible in small claims court.

Use a tool with date-stamped photos — HappyCo, zInspector, or your PM software's built-in inspection module (AppFolio, Buildium). Capture wide shots of each room plus close-ups of any pre-existing chips, stains, scuffs, or appliance wear. Date metadata is what defeats the "that was already there" dispute at move-out.

An unsigned move-in inspection is functionally useless. If the tenant disputes any noted condition, resolve it on the form before signing rather than after. E-signature via DocuSign or your PM software's built-in flow is acceptable in every state.

State caps vary — California limits to 2x monthly rent (1x for furnished post-2024), Massachusetts to 1x, many states have no cap. Confirm the cap for the operating state before invoicing. Pet deposits and last month's rent are typically separate from the security deposit and counted toward the cap differently per state.

Most states require deposits to sit in a separate trust or escrow account, not the operating account — Massachusetts and New Jersey require an interest-bearing account with annual interest paid to the tenant. Commingling deposit funds with operating funds is grounds for forfeiture in several states.

Several states (MA, NJ, NY, MI) require written disclosure of the bank holding the deposit and the account number within a defined window — 30 days in Massachusetts. Missing this triggers statutory damages up to 3x the deposit in MA.

Pre-1978 buildings: federal lead-based paint disclosure with EPA pamphlet. State-specific add-ons may include mold (CA, TX), bedbug history (NYC, AZ), Megan's Law (CA), flood zone (NY, NJ, TX), and known-defect disclosures. Missing the lead disclosure carries per-violation HUD/EPA penalties.

Store the signed inspection, deposit receipt, disclosures, and dated photos in the tenant file in your PM software. Most states require retention for 3-7 years post-move-out; FCRA requires screening reports be retained or disposed of per its rules.

California requires offering an initial inspection 2 weeks before move-out so the tenant can cure deficiencies. Several states require the tenant be invited to attend the move-out inspection. Schedule with written notice respecting state entry-notice rules (typically 24-48 hours).

Mirror the move-in shot list — same rooms, same angles. Capture appliance interiors, behind doors, inside closets, and any area the move-in photos covered. The side-by-side comparison is what defends each line item on the itemized statement.

Walk through both photo sets side by side. Flag every condition delta and tag it as either normal wear (faded paint, minor carpet wear, small nail holes) or chargeable damage (holes in drywall, pet stains, broken fixtures, missing items). Wear-and-tear charges are the most-disputed line items in deposit litigation.

Reference your state's wear-and-tear guidance. Carpet typically depreciates over 5-7 years — replacing a 6-year-old carpet is the landlord's cost, not the tenant's. Repaint after 2-3 years of occupancy is generally wear. Burns, pet stains, and large holes are damage at any age.

Each deduction needs a paper trail — vendor invoice, receipt, or a documented hourly rate plus time for in-house labor. Round-number estimates ("$300 for cleaning") without backup get disallowed in court. Attach invoices to the itemized statement so the tenant can verify each charge.

Net the documented deductions plus any unpaid rent or fees against the held deposit (and any required interest in MA, NJ, NY, IL). Determine whether a refund is owed, the deposit is exhausted, or the tenant owes additional balance.

Use your state's required format if one exists. Each line: description of damage, repair performed, amount, attached invoice reference. Include the original deposit, total deductions, and resulting refund or balance owed. This is the document a judge reads first if the tenant sues.

State windows are hard deadlines: CA 21 days, TX 30 days, FL 15-30 days, MA 30 days, NY 14 days. Use certified mail or a tracked delivery method to the tenant's forwarding address. Missing the window can forfeit the right to deduct and trigger statutory damages (2x-3x the deposit in several states).

Refund must accompany the itemized statement, not follow it. ACH via AppFolio or Buildium is fastest; paper check to the forwarding address is the fallback. Note the check number or ACH reference on the tenant ledger.

When deductions exceed the deposit, the itemized statement should already show the balance owed. Follow up with a formal demand letter giving the tenant a defined response window (typically 10-30 days) before referring the balance to collections or filing in small claims. Keep the dollar threshold for collections referral in mind — under $500 is rarely cost-effective.

Archive the itemized statement, vendor invoices, move-out photos, refund check copy or ACH confirmation, and any correspondence in the tenant folder. Retain per state requirements — typically 3-7 years post-tenancy. This is the package you produce on day one of any deposit dispute.