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The Security Deposit
The Security Deposit Agreement (
MCA 70-25
)
Most landlords require the tenant to put down
an amount of money, separate from rent, to protect the landlord
from losses due to tenant-caused damages, appropriate cleaning not
performed by the tenant, and unpaid rent and utilities owed by the tenant
after the rental agreement is terminated. This is usually called the
"cleaning " or "security" deposit. It
should be noted, however, that any money (or its equivalent) collected
by the landlord to ensure the permesis are left clean, no damages have
occured, and that all rent and utilities are payed is considered to be
a security deposit, no matter what it is called (
MCA 70-25-101 (4)
). This means that landlords cannot evade security deposit regulations
simply by calling the security deposit, or a portion thereof, by a different
name (i.e. pet deposit, cleaning fee, etc.)
It should also be noted that Montana law defines security deposits
as "value given in money or its equivalent
" (
MCA 70-25-101
). This means that if tenants are required to perform cleaning
on the apartment when they move in, an appropriate charge for their
labor is part of the security deposit and must be refunded to them upon
termination of the tenancy.
The security deposit is the tenant's money throughout the tenancy
and is eventually refunded to them provided they don't owe any rent
and leave the rental unit in as good condition as when they moved in.
Non-refundable cleaning and security deposits are not allowed under Montana
law.
The security deposit agreement should be set down in writing.
Refer to our sample & model rental forms
page
for a model agreement. If the landlord does not want to sign
an agreement, the tenant should make sure to get a receipt for the deposit
and save it for future reference.
Statement of the Condition of the
Premises (
MCA 70-25-206
)
At the beginning of the tenancy the landlord must provide
the tenant with a written statement of the condition of the premises.
The landlord is also required to provide a list of damage and cleaning
charges assessed to the previous tenant upon the tenant's request.
Many landlords choose to have their tenants fill out a "check-in" sheet
or like the condition of premises form in our
sample & model rental forms page
in order to comply with this requirement. The condition of
premises report is important because without it there is no evidence
of the condition of the unit when the tenant moved in. The report protects
the tenant from being charged for conditions that existed prior to the
beginning of the tenancy and provides the landlord with the evidence
necessary to withhold money from the security deposit for damages caused
by the tenant.
If the landlord fails to provide a statement of the condition
of the premises, s/he relinquishes his or her/his claim to withhold
cleaning or damage charges from the security deposit when the tenancy
ends. Without a written condition of premises the legal burden of
proof is on the landlord to prove by "clear and convincing evidence"
that the tenant is responsible for the damage in question. This evidence
must be presented before any part of the deposit can be withheld.
Security Deposit Refund
After proper notice has been given by either the tenant or
the landlord that the rental agreement is to be terminated, there are
a series of steps that need to be taken to ensure that the tenant relieves
all the security deposit due to her/him and that the landlord is able
to withhold any necessary amount from the deposit.
1) Within 7 days of the final termination of the agreement,
preferably after all or most of the tenant's belongings have been removed
and cleaning has been performed, a final inspection of the premises
must be performed (
MCA 70-25-201 (2)
). Ideally, both the tenant and landlord will be present for
this inspection, but if this is not possible then the landlord may
perform the inspection without the tenant being present.
2) After the inspection has been completed, the landlord must
deliver a written list of additional cleaning to be completed by the
tenant to bring the unit into the same condition as when it was rented.
The landlord must give the tenant
at least 24 hours to complete the required cleaning (
MCA 70-25-201 (3)
). If, after the final inspection, there is no further cleaning
to be completed, no damages to the property for which the tenant is liable,
no unpaid rent and the tenant can prove to the landlord that there are
no outstanding utility bills for which the tenant is responsible, the
landlord must return the full amount of the security deposit to the tenant
within 10 days (
MCA 70-25-202 (2)
).
3) After the tenant has had the opportunity to complete any
required cleaning and has returned the keys to the landlord, the landlord
must deliver to the tenant, within 30 days, an itemized list of
deductions from the security deposit along with any portion of the security
deposit remaining (
MCA 70-25-202 (1)
). If the tenant fails to deliver their forwarding address to
the landlord, this does not forfeit the tenant's claim to the security
deposit. If the landlord does not comply with this requirement, s/he forfeits
their right to withhold anything from the security deposit for cleaning
or damages (
MCA 70-25-204
).
Ocassionally a situation will arise where the landlord and
the tenant disagree as to a reasonable amount to be withheld from the
security deposit. To avoid as many of these conflicts as possible,
landlords should be sure to present every tenant with an
initial condition of premises report
at the beginning of tenancy. Without the initial condition
of premises report, the landlord must be able to show by "clear and
convincing evidence" that the damage caused, or cleaning required is
the tenant's fault. Additionally, landlords are not permitted to deduct
money from the tenant's security deposit for "normal wear" (
MCA 70-25-101 (1)
) or for cleaning that is performed on a cyclical basis (
MCA 70-25-201 (3)
). For instance, if a landlord paints the walls after every tenancy,
s/he may not charge the tenant for the painting.
If a tenant disagrees with the landlord's itemized list of
security deposit deductions, they should send the landlord a letter
detailing why they dispute the deduction (e.g. the damage was preexisting)
and requesting the landlord send them an additional refund. Alternatively,
cases may occur where the security deposit is insufficient to cover damages
caused by the tenant and unpaid rent and/or utilities. In this case, landlords
must still send the departing tenant an itemised list of deductions, but
in place of a check for the remainder of the security deposit, a bill for
the additional charges. If the landlord and the tenant cannot come to
an agreement on the amount of the deduction from the security deposit, a
Small Claims Court judge may ultimately have to decide (see
Solving Problems
).
Section 8 Security Deposits
Section 8 landlords are allowed to collect security deposits
from their tenants. However, MDOC local field agents may prohibit security
deposits above private market practice or above the amount
required of non-Section 8 tenants. For Moderate Rehabilition
Housing, the landlord may collect a security deposit in the amount
of one month's tenant payment, or $50, whichever is greater. The Montana
Residential Security Deposit Act (
MCA 70-25
) applies in full to all Section 8 security deposits.
For more information on this issue, visit our section on
Subsidized Housing/Section 8
.
The Holding Deposit
A holding deposit is often paid by a prospective tenant to reserve
a dwelling space for a certain amount of time until a rental agreement
is formally initiated. In accepting such a deposit, the landlord is
considered to have given consent for the person to take possession of
the property. When you do move in, the deposit is normally returned
or applied to the rent or security deposit. If you pay a holding deposit
and then back out of the deal, the landlord usually keeps the deposit as
payment for having taken the unit off the market while you made up your
mind.
The above definition of a holding deposit is drawn from the laws
of other states, not from Montana. The Montana Residential Landlord
Tenant Act does not define the term holding deposit. Lacking this state
legal definition, it is very important to negotiate a complete rental
agreement as well as a written agreement with the landlord spelling out
the terms of the holding deposit, including the last date that you can
opt not to sign the rental agreement. Without a written agreement regarding
the holding deposit, it would be the landlord's word against the word of
the prospective tenant as to what the holding deposit money was for. Without
a written agreement, a landlord could keep all of the holding deposit after
previously verbally agreeing to apply the money towards the security
deposit when the tenant moves in. Download a model holding deposit
agreement in our sample
& model rental forms page
.
Before you pay a holding deposit, make sure you have the conditions
of the holding deposit spelled out on paper to your satisfaction. Get
a receipt for the payment, and be sure to keep a copy of the holding deposit
agreement for yourself.
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Montana Residential Landlord Tenant Act