Security deposits and how landlords use them can be a source of much dispute and litigation between landlords and tenants. In fact, earlier this year, the Missouri Court of Appeals, Southern District, decided Younker v. Investment Realty, Inc., 461 S.W.3d 1 (Mo. Ct. App. 2015), which centered on such a dispute. That case ruled in favor of the tenants and held that the statutory requirements imposed by Missouri law on residential landlords cannot be contractually varied or altered, regardless of lease terms agreed to by the tenant.
Missouri landlords should be aware of several statutory and common law rules that govern how security deposits may be applied for repairs and the manner in which a tenant’s security deposit must be returned. Failure to understand the relevant Missouri law, as Younker v. Investment Realty, Inc. demonstrates, could leave a landlord exposed to potentially costly legal disputes and litigation. Specifically, there are at least three sets of important statutory and common law rules governing security deposits in Missouri that landlords should discuss with an experienced attorney. The Law Firm of Neale & Newman is proud to have represented and advised Missouri landlords for decades and can assist you in understanding each of these important areas of Missouri landlord-tenant law.
First, any Missouri landlord should be aware that Missouri law limits how much a landlord can charge a tenant for a security deposit. The amount that may be charged depends on the type of property being rented and the amount of the rent. Landlords should review with an attorney the amount charged to tenants as a security deposit in order to insure compliance.
Second, Missouri law sets a time limit for how long a landlord may wait before returning that portion of the security deposit, if any, that is owed to a tenant after the termination of the rental agreement. In the event the full security deposit is not returned to the tenant, Missouri law imposes certain notice requirements with which a landlord must comply. A failure to comply with these notice requirements can expose a landlord to civil liability for damages and statutory penalties. Landlords thus should review their security deposit refund practices with an experienced attorney to insure compliance with the relevant Missouri law.
Third, Missouri law limits what types of repairs and charges a landlord may bill against a tenant’s security deposit. This is often one of the most troublesome issues between landlords and tenants. Notably, it was this precise issue that prompted the tenants in Younker v. Investment Realty, Inc., to sue their landlord and continue to prosecute the case all the way to the Missouri Court of Appeals.
Although there are many reasons that may justify a landlord’s withholding of sums from a tenant’s security deposit, there are also many limitations. For example, generally a landlord may withhold money from a security deposit if the tenant fails to pay rent or fails to properly notify the landlord that he or she is terminating the rental agreement. Similarly, a landlord may generally withhold money from a tenant’s security deposit to restore the leased property to its condition prior to commencement of the rental agreement, if the tenant damages the leased property. What constitutes actual damage, however, as opposed to ordinary wear and tear, has been the subject of significant litigation.
Before withholding money from a tenant’s security deposit, a landlord should talk with an attorney to understand what type of charges may be appropriately against the security deposit. This is especially true because the relevant statutes do not define “ordinary wear and tear,” and thus the definition of the phrase is defined by Missouri case law in decisions like the recent Missouri Court of Appeals case. Additionally, landlords should review any cleaning fees or other charges with an attorney because billing certain fees for cleaning or related activities may not be proper, depending on the specific facts of the case.
When a tenant actually damages the leased property and the landlord intends to withhold all or a portion of the tenant’s security deposit, the landlord should keep all receipts for repairs and photos of any damage on file. This precaution will help a landlord if a tenant challenges the landlord’s withholding some time down the road. Because the statute of limitations for landlord-tenant disputes can run for many years, a landlord who fails to keep such receipts and photos may have difficulty defending against the tenant’s claims.
No plan to avoid a landlord-tenant dispute over a security deposit will avoid all conflict; however, landlords can take important steps to protect their interests by following the pertinent Missouri law that applies to tenant security deposits. The Law Firm of Neale & Newman has been providing legal services in Missouri for over 100 years, and the attorneys at Neale & Newman understand the importance of complying with Missouri law as it pertains to landlords and tenants. Our attorneys can help you determine whether your business is charging tenants a permissible security deposit amount and whether your processes and procedures for returning a tenant’s security deposit or, when necessary, withholding amounts from it are appropriate under the most recent Missouri law. Discussing with experienced legal counsel these and other issues that may arise is a landlord’s best bet for avoiding liability.