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Security deposit reform



Security Deposits

Ohio's laws on security deposit are pretty straightforward and mostly ignored by landlords and tenants. A recent article in Slate magazine suggests: "We’re Doing Security Deposits Wrong." Before we tackle changing the law, let's look at the current law, which is at Ohio Revised Code 5321.16.

Ohio's Landlord Tenant Law says that a landlord may collect a deposit of money or property to "secure performance by the tenant under a rental agreement.." ORC 5321.01 (E). What that means is that the security deposit is to be used to cover the cost of unpaid rent or damages in connection with the rental agreement. A security deposit is legally different from a deposit to hold a unit.

Ohio Landlord Tenant Law says that a landlord has 30 days after tenant terminates the rental agreement and gives up occupancy (ie. turns in the keys), to return the security deposit minus any deductions for unpaid rent or damages. If landlord makes a deduction, she/he must provide a written itemized statement of the reason for the deductions. Tenant is required to leave a written forwarding address. If tenant doesn't receive the returned deposit or if tenant disagrees with a deduction, tenant may bring a claim for DOUBLE the amount that the tenant believes was wrongfully withheld. Ordinarily tenants bring actions for wrongful withholding in Small Claims Court in the jurisdiction where the property is located.

If it were that simple. no problems, but in real life there's dozens of "what if". RHINO has listed some of those questions in a Q&A here.

The biggest flaw in the current system is that tenants don't fight to get their security deposits returned. Even the promise of DOUBLE DAMAGES is not enough incentive for tenants to bring a court action to challenge a wrongful withholding. There's a number of reasons for tenant inaction.

1.  Bringing a claim means taking time off work or school, traveling downtown, and filling out legal paperwork.

2.  If the tenant moved out of the area, tenant has to return to her/his former community twice: once to file and again for the hearing.

3.  Tenants expect to lose in court, because they assume they are legal underdogs. Some tenants are afraid landlords will counterclaim and tenants will lose more and have to pay the court costs too.

Instead of recovering their security deposits, tenants simply fail to pay the last month's rent and move without leaving a forwarding address. Problem solved, right? Well, as the heavyweight boxer Joe Louis used to say: "You can run, but you can't hide." A litigious landlord, maybe someone who's a lawyer or has a lawyer on retainer, could file an eviction for the unpaid rent, win a summary judgement for back rent AND DAMAGES, and then pursue a collection action like garnishment of wages or attachment of property. Oh, and...all that could ends up on the tenant’s credit record.

The article in Slate magazine proposes an alternative system, currently in use in Great Britain. In England, Wales, Scotland and Northern Ireland. In these countries, landlords must put tenants' security deposits in the hands of a government approved holding agent. Slate explains: "When the lease ends and the tenant moves on, the money must be refunded within 10 days of coming to an agreement over the amount to be returned. If there’s a dispute over whether damages occurred or the cost of the repairs needed, the parties can choose to go to what is called an alternative dispute resolution service, which are run by the organizations that hold the money. They cost nothing but require both parties to agree to be bound by the decision. This prevents prolonged court battles."

Could this idea work in Ohio?

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