Missouri Real Estate Lawyer

In 2016, Missouri statute §535.300 was revised to require residential landlords to hold security deposits in an account owned by a trust. That statute has again been revised, and as of August 28, 2018, landlords are no longer required to hold security deposits in a trust account. However, under the new law, landlords must still hold security deposits, for the tenant, in a “bank, credit union, or depository institution which is insured by an agency of the federal government.” We construe this statute as prohibiting a landlord from withdrawing a security deposit from such account until after the lease has terminated and after the landlord has complied with the other requirements of §535.300, which are described next. We also suggest that landlords not co-mingle security deposits with funds that are not security deposits.

Security Deposit Defined

Security deposits are still capped at no more than double the monthly rent. §535.300 defines a security deposit as “any deposit of money or property, however denominated, which is furnished by a tenant to a landlord to secure the performance of any part of the rental agreement, including damages to the dwelling unit.” Whether funds provided to the landlord are a security deposit depends on whether the funds meet this definition, not what the funds are called in the lease or how the payment is otherwise characterized. Last month’s rent, for example, is a security deposit, because it’s held by the landlord to secure the tenant’s obligation to pay the last month’s rent. As such, this amount counts toward the maximum double monthly rent that the landlord may demand.

The definition of a security deposit does not include pet security deposits. Therefore, a landlord is not limited in the amount of money or property that the landlord can demand as a pet security deposit. In fact, landlords should not deposit any pet security deposit into any security deposit account discussed above, as such would be a comingling of funds in the security deposit account.

Further, the requirements of §535.300 only apply to the rental of “dwelling units”. As such, commercial real estate is excluded from the requirements of the statute. However, a landlord that is a company, partnership, or any other business entity must comply with the statute when renting a dwelling unit, which includes a house, townhouse, duplex, condominium, apartment, or any other type dwelling unit.

Return of Security Deposit

Landlords of dwelling units must return the full amount of the security deposit within 30 days of the termination of the tenancy. The deposit must be mailed to the tenant at the tenant’s last known address, which will often be the address of the rental property. Except, a landlord may withhold from the security deposit the amount that is reasonably necessary: (i) to cover past due rent, (ii) to repair damage to the property, and (iii) to otherwise compensate the landlord for damages caused by the tenant’s failure to give adequate notice to terminate the tenancy. In order to lawfully retain such portion of a security deposit, the landlord must provide to the tenant, within 30 days of the termination of the tenancy, an itemized list of rent and damages for which the deposit is being withheld. Any portion of the deposit not being lawfully withheld by the landlord must be mailed to the tenant along with the itemized list. The landlord will be liable to the tenant for double the portion of the security deposit that is refundable and not mailed to the tenant within the 30 days.

The landlord may withhold as much of the security deposit as is necessary to restore the property to the condition it was in at the beginning of the lease, excepting ordinary wear and tear. However, the landlord and tenant may agree in the lease on an amount or fee to be deducted from the security deposit to clean ordinary wear and tear of carpeting. The landlord may additionally deduct from the security deposit the actual cost to clean carpet damage that exceeds ordinary wear and tear. However, the lease must include a provision notifying the tenant that the tenant may be liable for such additional cost and that it can also be withheld from the security deposit. Within 30 days of the end of the tenancy, the landlord must provide to the tenant a copy of the receipt for such actual costs.

Additionally, the landlord must notify the tenant in writing of the date on which the landlord will inspect the property to determine the amount of the security deposit that will be withheld, if any. The inspection must be performed at a reasonable time, and the tenant has the right to be present at the inspection.

Disclaimer of Landlord Statements

Often during an inspection with a tenant, the landlord will make statements about the scope of damage to the property and the estimated cost to repair the damage. Tenants will often try to hold landlords to these statements during litigation over the security deposit. Landlords should therefore include in the lease a provision disclaiming statements made during the inspection and notify the tenant during the inspection that the landlord’s initial views about the scope and cost of the damage found during the inspection are subject to change and that the damage itemized in the final accounting may be different than that communicated during the inspection.

Pet Security Deposits

A landlord is not required to follow the above statutory rules as to a pet security deposit. However, it would be prudent for landlords to treat pet security deposits similarly to a regular security deposit. For example, landlords should inspect for pet damage at the same time as inspecting for other damage. Amounts required to repair pet related damage should be itemized, and, if possible, any unused portion of the pet deposit should be returned to the tenant within 30 days after the termination of the tenancy. The lease should include a separate provision clearly communicating the landlord’s pet policies. Taking such steps will help minimize disputes over the pet security deposit.

This article is for general informational purposes only. This information is not intended as legal advice. Please contact us regarding how this information might apply to your specific circumstances.

Sewell Law represents clients on real estate, business, and litigation matters.

Please contact Michael Sewell at (314) 942-3232, or at michael@sewelllaw.net., for a confidential consultation.

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