Charge-credits on Security Deposit Returns

Posted on September 29, 2016

What’s a charge-credit on the security deposit return? Or, hey, we were billed for X but my renewing roommates say X was not fixed/done at their place. What’s up?

Good question. Charge-Credits are usually only relevant to leases where some of the tenants leave and some of them return to stay another year. This is called a Partial Renewal. If one person, leaves, or even 4 out of 5 people leave, but others stay on, then its a partial renewal and is handled a bit differently than a new lease.

When a renewal happens, we conduct a renewal inspection similar to a move-out and move-in inspection for a regular new lease. Issues that need to be handled, from broken items, to painting and damage, are all noted. These costs are then charged directly or estimated and billed as part of the partial renewal security deposit return.

Departing tenants are responsible for their share of the issues identified at the time of turnover. That’s fair, right?

All of the current tenants (those leaving and those renewing) are fully responsible for anything noted during this renewal inspection. It wouldn’t be fair to the new tenants, those who join the group, to have to pay for stuff that happened while the departing tenants were there. No. No, it wouldn’t be.

Sometimes the work that is identified as needing to be done is not done at that time–tenants may elect to wait until their leave at the end of their term, for example. This does not mean the departing tenants get off scot free. Again, that wouldn’t be fair. If it looks like your place will need a lot of work, but the returning/new tenants don’t want it done at the time then you are still responsible for ponying up for when the work eventually does need to happen.

Charge-Credits charge departing tenants for work needing to be done, and credit those staying

This is where a Charge-Credit comes in. The CHARGE for the work is put on the outgoing ledger. That is, the old group of folks is charged for the repair/turnover issue. Then a CREDIT is issued on the new lease that bumps their security deposit up by the amount of the charge. Thus CHARGE-CREDIT. The returning tenants will then have a security deposit that is greater than the amount they paid into their security deposit (assuming they have paid the difference between their original security deposit and any amounts deducted during the partial turnover–that is, they need to make the secdep “whole” too).

This way, they have a credit for the work that you would have paid for had you all moved out and you had had to pay your share for when they need to handle move out themselves after the end of the new lease. You pay your part, you move on, and your part helps the returning tenants with issues that you were involved with during your tenancy.

So, Charge-Credits are charges for items noted during a renewal inspection but not addressed at that time. They treat the outgoing, returning, and incoming tenants fairly in regards to damages noted during a renewal turnover.