QUESTION- We followed the 45-Day Letter Rules and deducted a $200 carpet cleaning and repainting fee that the lease clearly describes. Yet, the tenant claims we owe her the entire security deposit back and that Indiana law does not allow us to keep from the security deposit anything other than damages, unpaid utilities and unpaid rent. Is this tenant right?
MATT’S ANSWER- No, the tenant is wrong for several reasons. Your lease specifically states that you can withhold that $200 fee from the security deposit. Secondly, the $200 fee is a form of damages called “liquidated damages.” In essence, you and the tenant agreed to “liquidate” certain repairs costs – carpet and paint – at the set amount of $200. Clearly, damages amounts can be withheld from the security deposit.
Additionally, the Indiana Court of Appeals and Supreme Court have held in prior landlord-tenant cases that a tenant is not owed a 45-Day Letter Notice for unpaid rent, because the tenant already knows that the tenant owes rent. The purpose of the 45 Day Letter Rule is to give the tenant notice of what amounts and why the tenant is not getting all her security deposit back. There is no point in sending a tenant notice to apprise her of her obligation to pay rent, as the tenant already knew about that obligation – it’s in the lease she signed. So, the Courts have ruled against tenants in security deposit lawsuits where the deposit refund has been reduced by the amount of unpaid rent. Here, the $200 fee is no different than the unpaid rent – in both matters, the tenant knew in advance that the tenant owed that amount to the landlord. Accordingly, no notice in the form of a 45 Day Letter would be required.
Read more about Indiana’s Security Deposit Laws.