How Does House Bill 1074 Change How Security Deposits Work?

In April 2023, the Washington State Legislature passed a new bill regarding tenant security deposits. House Bill 1074 will be in effect for all new move-ins starting July 23, 2023. This is important to read because it means that current leases are not grandfathered in unless your current process follows what is now legally required.

Let’s start by reviewing Washington’s previous law regarding security deposits, and how Zenith best practices this, and then discuss the changes in Washington’s new security deposit law.

How Did Washington’s Old Security Deposit Law Work?

Let’s say your current tenant has moved out. The day that keys are received opens the 21-day countdown to give your tenant their statement of deposit accounting. You can either hand-deliver or post it in U.S. Mail to the tenant’s last known address. Landlords sometimes refer to this as a “Final Accounting” or “SODA”. No documentation besides a simple statement is legally required.

Here at Zenith, we provide tenants with invoices that correlate with the statement of the deposit accounting. If we do not have all of the invoices by the 21st day, we will provide the tenant with an estimated deposit of accounting. We will provide the statement of deposit accounting with all of the invoice amounts that we currently have, and then best estimate what’s missing. Once we receive the final invoices, we then send the adjusted final accounting statement.

From there the tenant will either receive a refund or owe funds. If the tenant receives a portion of their deposit back, that typically means they took great care of the home, and as a landlord, you collected the right amount of deposit at move-in to cover all tenant charges. This saves the owner from paying out of pocket and waiting for the previous tenant to repay the monies owed. If the tenant owes funds, and the owner is not reimbursed promptly, then further legal action can be taken such as collections and/or small claims court.

How Does Washington’s New Security Deposit Law Work?

Now, let’s discuss what changed starting on July 23, 2023. First, it’s important to understand there are some new added “terms”. The largest difference you may notice is that there is no longer what is called “normal wear and tear.” Instead, it is now classified as “wear resulting from ordinary use of the premises.” This includes breakage or malfunction due to age or deteriorated condition. This new term is more open for discussion; therefore, as the landlord, you should be as detailed as possible.

The lease must be in writing, and the tenant must be given a written checklist that specifically describes the home and conditions of many items. Some of the new specific requirements are that a landlord must document the fixtures, equipment, carpet, walls, and even furniture. Make sure to keep that in mind if you are renting a furnished home: each item must be documented at move-in, down to the silverware.

Perhaps the biggest news for landlords is that we now have 30 days to return a full and specific statement outlining the basis for retaining any of the deposit. You must also include any documentation you have backing it up. The legal requirement for this documentation is very detailed. The landlord must provide a detailed and itemized copy of the bill, invoice, or receipt. However, you run some risk here because you still have to provide a full and specific statement of the estimate and you cannot back-charge based off an estimate. And you cannot estimate it too high, because that violates the section of withholding the deposit for normal wear and tear and we are not allowed to withhold any of the deposit after 30 days.

What If It’s the Tenants Fault?

There is one new section that we should review, as it falls in favor of landlords as a last resort:

“…unless the landlord shows that circumstances beyond the landlord’s control prevented the landlord from providing the statement and any such documentation within 30 days or that the tenant abandoned the premises as described in RCW 59.18.310.”

An example that would fall under this section might be a scenario like: “The tenant never turned in keys on the move-out day as agreed. It then took us six days to get ahold of them, and we then had to schedule and wait for a vendor to drill out the lock because the tenant didn’t provide keys. So, Your Honor, it took an additional 20 days before we could even get our eyes inside the home. As you can see, this fell out of our control”.

However, as a landlord in Washington, documentation is once again paramount. You can’t just say this — you have to prove it. While this does give landlords an option, you don’t want to rely on this section of the law because, as we all know, in Washinton state, the tenants have the upper hand.

Call the Experts on Washington Rental Law

In conclusion, big changes are happening, and it may seem confusing, but when you work with an experienced property management team like Zenith, there’s nothing to worry about.

Here at Zenith, we have studied up on the new law, have a process in place, and best of all, all of our current leases will follow this new law. As property owner, there’s nothing different you need to do. We provide our tenants with a written lease and a move-in statement at move-in. Every new item that is required to document at move-in, Zenith already does!

So if you’re ready to simplify your process and ensure you’re always up-to-date with the latest tenant laws, give Zenith a call today at (360) 369-3577!