How can you avoid security deposit disputes?

If there's going to be any legal dispute between a tenant and a landlord, it's most likely to be over the use of the security deposit. Renters are usually required, in addition to paying rent, to provide their landlord with a security deposit. The purpose of this deposit is to pay for repairs in the event that there is damage to the property beyond wear and tear from normal use.

The difficulty with this situation is that it's very hard to define "normal" wear and tear, or even normal use. When something breaks or needs to be repaired, it's often hard to know who is responsible. When the bathroom door falls off, is it the landlord's fault -- because the door was old and the hinges were rusty -- or are the tenants to blame, because they slammed the door too often? In some cases, disputes can be neutralized in advance by making sure that the contract is as detailed as possible. Photographs showing the state of the property at the beginning of the rental period can be very helpful, as can a walkthrough of the property by landlord and tenants together. In this way, both are aware of any problem areas or any defects that may already exist and therefore are not the responsibility of the tenants (and repairs of which will not come out of their security deposit). It also gives the landlord the opportunity to point out areas where caution is needed, thereby warning the tenants that damage in those places will be their responsibility. It's a good idea to have a signed disclosure or waiver showing what repairs will not need to be paid for by the renters. In Australia, for example, there is an official Property Condition Report, which landlords and renters usually fill in before finalizing a rental agreement [source: Tenants Advice Service].

If part of the security deposit is needed to repair damages, the balance will be returned to the renter when the contract expires. If there is no damage, the whole security deposit must be returned to the renter.