How to Write a Security Deposit Return Letter + Free Template

Returning a security deposit is one of the final steps in a tenancy relationship, and it's important to handle it properly. Indeed, knowing how to write a security deposit return letter can help you close things out smoothly and professionally. 

Today we’re presenting a practical guide on crafting these letters, complete with examples and essential details to keep in mind. 

Important note: While this guide offers helpful general advice, it’s vital to check local and state laws to ensure compliance with specific regulations in your area.

Note on language: Here at Second Nature, we prefer the term “residents” rather than “renters” or “tenants,” as that emphasizes the human element over the transactional. But because formal property management documentation often makes exclusive reference to “tenants,” we’ll favor that term in today’s post. 

What Is a Security Deposit Return Letter?

A security deposit return letter serves as formal documentation that details the return of the security deposit to the resident after they move out. It's more than just a formality – this letter can clarify the amount being returned, explain any deductions, and provide transparency to avoid deposit disputes.

When done correctly, this letter can help you avoid potential claims against the deposit. It’s also a chance to demonstrate professionalism and fairness, which can lead to positive relationships and, potentially, good word-of-mouth in the future.

Here are a few things to keep in mind when crafting a security deposit return letter:

• State laws: Local laws dictate the time frame in which a tenant’s security deposit must be returned, what deductions are allowed, and any other related requirements.
• Preventing disputes: A well-crafted letter can help prevent claims against you by clearly outlining the return process and any deductions made.
• Insurance considerations: In some cases, following the correct procedures for returning a deposit can also help you avoid issues with any insurance policies you may have in place in relation to security deposits.

Related: What is Security Deposit Insurance: Pros, Cons, and Best Practices?

Common Questions About Security Deposit Returns

Handling security deposits can be tricky, and questions often arise. Below are a few common concerns landlords and property managers face. Keep in mind that local and state laws vary, so always consult the relevant regulations.

What can a landlord or property manager deduct?

You can generally deduct unpaid rent, repairs for damages beyond normal wear and tear, and costs for cleaning if the unit is left in poor condition. However, these deductions must be reasonable, and you should always provide documentation, such as receipts or photos, to support them.

What is considered normal wear and tear?

Normal wear and tear typically includes things like minor scuffs on walls, light carpet wear, or small nail holes from hanging pictures. Essentially, it refers to the natural aging of a property during normal use. Anything beyond this—like large stains, broken fixtures, or damage from pets—may warrant deductions from the security deposit.

When should you return the security deposit interest?

In some states, landlords are required to pay accrued interest on the security deposit. If this applies to you, check the relevant deadlines and ensure you include any owed interest along with the returned deposit. You’ll need to itemize this in your letter as well.

What if you don’t have a forwarding address?

If the resident hasn't provided a forwarding address, it’s still your responsibility to attempt to return the deposit. Try reaching out through any available means, such as email or phone. If all else fails, you may need to follow state-specific protocols, such as holding the deposit for a set period.

Learn more: Security Deposit Alternatives for Property Managers and Residents

What to Include in a Security Deposit Letter

A well-organized letter should cover all the necessary information, presented in a clear and concise manner. Here’s a breakdown of the key elements you’ll want to include:

• Landlord's name and contact information: Your full name (or the name of your property management company) and how you can be reached.
• Tenant’s name and contact information: Make sure to address the letter to the correct person in relation to the correct property address.
• Date of letter: This is important for record-keeping, as well, and signals what day the notification was shared.
• Lease details relevant to the deposit: Reference the deposit or lease agreement that applies (you can also provide a copy of the relevant agreement).
• Original deposit amount: Clearly state the original amount of the security deposit.
• Itemized breakdown of deductions: If any deductions were made, list them here with the corresponding amounts and explanations.
• Receipts or documentation for deductions: Include copies of cleaning, repair, or maintenance receipts as proof of expenses.
• Remaining balance: Indicate the amount being returned after deductions.
• Deposit details: Mention how and when the deposit will be returned (e.g., check, direct deposit).
• Signature: Ensure that the letter is signed by you or an authorized representative from your property management company.
  
  

How to Write a Landlord Security Deposit Letter

Security deposit letters can take different forms depending on the situation. Here’s a brief overview of the most common types and when to use them:

• Security deposit letter for full refund: If you’re returning the full amount of the deposit without any deductions, this is the easiest letter to write. A straightforward explanation, along with the original deposit amount, is all that’s needed.
• Security deposit letter for partial refund: In cases where part of the security deposit is being withheld for cleaning, repairs, or unpaid rent, your letter will need to include an itemized list of these deductions. Be clear and provide any supporting documentation.
• Security deposit letter for no refund: If the entire deposit is being withheld, your letter should carefully explain why. Be sure to include receipts and a detailed breakdown of the costs involved, as this can help prevent disputes.
• Security deposit letter with request for payment: If the security deposit isn’t enough to cover the damages or unpaid rent, you may need to request additional payment. This letter should include a full explanation of the costs and a deadline for payment.

Below are sample letters for these scenarios:

Sample letter: Security deposit letter for full refund

[Your Name]
[Your Address]
[Date]

Dear [Resident’s Name],

This letter serves as confirmation that your security deposit of $[Amount] is being returned in full. Thank you for leaving the rental property in good condition. Please find the enclosed check for the total amount of your deposit.

Sincerely,
[Your Name]
[Your Contact Information]

Sample letter: Security deposit letter for partial refund

[Your Name]
[Your Address]
[Date]

Dear [Resident’s Name],

After inspecting the property, we’ve determined that $[Amount] will be deducted from your security deposit for the following reasons:

• [Itemized list of deductions and costs]

Please find the enclosed check for the remaining balance of $[Remaining Amount]. Receipts for the deducted amounts are attached for your records.

Sincerely,
[Your Name]
[Your Contact Information]

Sample letter: Security deposit letter for no refund

[Your Name]
[Your Address]
[Date]

Dear [Resident’s Name],

After inspecting the property, we’ve determined that the entire security deposit of $[Amount] will be used to cover the following costs:

• [Itemized list of deductions and costs]

Unfortunately, no balance remains to be refunded. Receipts for the deducted amounts are attached for your records.

Sincerely,
[Your Name]
[Your Contact Information]

Sample letter: Security deposit letter with request for payment

[Your Name]
[Your Address]
[Date]

Dear [Resident’s Name],

After inspecting the property, we’ve determined that the cost of repairs and unpaid rent exceeds your security deposit of $[Amount]. The remaining balance of $[Balance Due] is owed to cover the following:

• [Itemized list of deductions and costs]

Please remit payment by [Due Date]. Receipts for the deducted amounts are attached for your records.

Sincerely,
[Your Name]
[Your Contact Information]

How to Send a Tenant a Security Deposit Letter

The best way to send a security deposit return letter is by certified mail with a return receipt. This ensures that there’s proof of delivery, which can protect you in case of disputes. Some states may also allow you to send the letter electronically, so check local regulations to confirm the appropriate method.

Mistakes to Avoid When Writing a Security Deposit Return Letter

When writing a security deposit return letter, be mindful of some of the common pitfalls below.

Failure to meet the deadline

Every state has specific rules about how long you have to return a deposit, broadly ranging from 10 days after inspection (as in the case of Montana) to 60 days (West Virginia and other states). Missing the deadline can result in penalties.

Not providing enough detail

If you’re making deductions, be sure to include detailed explanations and supporting documentation, as specified earlier.

Neglecting to include interest

In states where interest on security deposits is required, make sure you calculate and include it in the return. It’s best to document this early on to save yourself a headache down the road.

Not retaining a copy

Always keep a copy of the letter and any related documents for your records. It helps to also back up electronic documents, as well, but be sure to keep original copies of everything first.

Final Thoughts

Handling security deposit returns correctly can help you avoid disputes and maintain good relationships with residents, even after they’ve moved out. By following these guidelines and customizing your letters to fit the situation, you’ll be able to navigate this process smoothly and professionally, while ensuring a positive experience for all parties.

For more tips on improving the resident experience, check out Second Nature’s Resident Benefits Package.