Even when a tenancy seems to be performing perfectly, you should always consider the regulations that bind your acceptance, usage, and return of the security deposit. It never hurts to play it safe.

Accepting the security deposit

Delaware is one of the few states that regulates the amount of security deposit depending on the furnishings of the premises. In an unfurnished property, you may not require a security deposit greater than one month’s rent if the agreement term is one year or longer or a month-to-month tenancy that has lasted for longer than a year. For a furnished property, there is no limit to the security deposit, though most landlord require an amount equal to one to two months’ rent. In addition and if applicable, you may require a pet deposit to cover damage to the premises by your tenant’s pet that must not exceed one month’s rent regardless of the duration of the agreement.

All security deposits that you accept from your tenant(s) must be placed in an escrow bank account in a federally-insured banking institution with an office that accepts deposits within Delaware. The account may not be used in the operation of any business by the landlord, must be disclosed to the tenant as to its location, and must be held and administered for the benefit of the tenant. The tenant’s claim on the security deposit is prior to that of any creditor of the landlord.

Failure to disclose the location of the security deposit within 20 days after a written request by the tenant, or failure to deposit the security deposit in an escrow bank account constitutes forfeiture of the security deposit by the landlord to the tenant. Any failure by the landlord to return the full security deposit within 20 days after the date of forfeiture entitles the tenant to double the amount of the security deposit.

Using the security deposit

Any landlord hopes that you won’t have to use the security deposit; however, using it wisely and legally can avoid any mishaps on the part of either you or your tenant. The purpose of the security deposit includes the following:

  • Reimbursing you, the landlord, for actual damages caused to the premises by the tenant (not including normal wear and tear), or which cannot be corrected by painting or ordinary cleaning.
  • Paying you for all rental fees or charges due, including late fees and rent due for certain premature termination or abandonment by the tenant.
  • Reimbursing you for all reasonable expenses incurred in renovating and re-renting the premises caused by certain premature termination of the tenancy by tenant, provided that said reimbursement does not exceed one month’s rent.

Returning the security deposit

You, the landlord, must return either the full sum of the security deposit, which constitutes your agreement that there was no payment for damages due, or a portion of the security deposit and a written statement itemizing the deductions you made to the total sum. The tenant’s acceptance of the itemized list is their agreement to the accuracy of the damages on the premises as you have specified in the list, unless the tenant objects in writing to the amount you’ve withheld within 10 days of receipt of the statement. Any failure on the landlord’s part to return the security deposit or any portion of it rightfully belonging to the tenant within 20 days after the tenancy has terminated entitles the tenant to double the amount wrongfully withheld.

Prior to the tenancy ending or in writing immediately after, your tenant should provide a forwarding address to which the security deposit or any portion of it including the itemized list may be sent. Failure to provide a forwarding address relieves you from any obligation of sending the notice and any liability for double the amount unused after the notice period has passed. You are still liable, however, for any unused portion of the security deposit until either the tenant has made a claim in writing for the security deposit within a year from the date of termination or a year has passed from said date.