Property Management - Autumn 2017




Question

We have a lot of disputes with (former) tenants over our security deposit accountings.  Does putting “paid in full” or something similar on the memo line of a returned deposit check to a tenant in any way help a landlord if a tenant decides to sue for amounts withheld from the deposit?

 



Answer

The answer is actually quite complicated, but the quick answer is ‘No’.

We need to start our analysis with the Residential Landlord Tenant Act.  RCW 59.18.280(1) governs security deposit accounting and states in relevant part, “Within twenty-one days after the termination of the rental agreement and vacation of the premises…  the landlord shall give a full and specific statement of the basis for retaining any of the deposit together with the payment of any refund due the tenant under the terms and conditions of the rental agreement.”  Thus, you need to mail the tenant both the statement accounting for any deductions from the deposit as well as any refund to which they are entitled, within 21 days of the date they vacate.

What you are proposing is to add a condition to the refund that you are legally required to give them, basically taking away the (former) tenant’s right to challenge the deposit accounting if they accept the check.  Let’s say a tenant has a $500 Security Deposit and after assessing the damages, you determine that they are entitled to $100 back.  Since you want to avoid a dispute with them, you place a restrictive endorsement on the $100 check (I defer the discussion of the different forms of endorsement that you could make).  When the tenant receives a check for $100, they have two choices, they can accept the check (and waive any claim) or they can reject the check.   But since you already believe that they are entitled to $100 back, if the tenant believes they have a claim for more, your restrictive endorsement deprives them of something that EVEN YOU believe they are entitled to, namely $100.  Put another way, you are telling the tenant that in order to receive what you already believe they are entitled to, they must waive any claims against you.   Most judges would say that is not fair, why should the tenant waive their claims just to receive what it is that both of you and the law says they are entitled to (a refund within 21 days of the date they vacate). 

Now, let’s look at an alternative...

Same $500, same assessment of damages to the property and same $100 refund check.  However, instead of the endorsement on the $100 check, you send them two checks—one for $100 plus another check for $50 which you are offering in compromise of any dispute them may claim.  You write a cover letter saying, “we believe you are entitled to $100 so that check is included, no strings attached.  However, we also enclose a check for $50 which does have a restrictive endorsement on it.  You can accept or reject the $50 check. But if you accept it, you waive all other claims for a refund of your deposit.”  The idea here is that you are returning the tenant’s $100 they are owed, and also $50 extra if they waive any claim they may have against you for more of the deposit to be refunded.  So, the tenant in this example has a fair choice.  Therefore, if they cash both checks, they have accepted your offer of settlement.  

Now, please understand that I am not advocating that you use this “two check” method of performing security deposit accounting. I am only suggesting that there might be a legally enforceable way to do it.




Christopher T. Benis is an attorney with Harrison-Benis, LLP with offices in Seattle. The information contained herein is not legal advice. You are encouraged to consult with your attorney before relying on anything contained herein.


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