The majority of states hold landlords to strict guidelines as to the appropriate circumstances in which they must return security deposits. Landlords who violate these laws can be held to stiff penalties.

A security deposit is usually in the amount of one or two months' rent. It usually must be paid at the time that the Landlord and Tenant sign the lease. The landlord must place the funds in an escrow account and give the tenant any interest generated by such funds. Upon the termination of the lease, the landlord must return the security deposit to the tenant if no violations of the lease occurred. He or she may keep the security deposit or portion thereof for the amount of any damages, which can be proven, pursuant to the terms of the lease.

Basic “Wear and Tear” versus Excessive Damage

The general rule is that you are not responsible for normal wear and tear. For example, if the dishwasher must be replaced because it has simply worn out, that's the landlord's responsibility. See the bottom of this article for examples of repairs and damages that can and cannot be deducted from your security deposit.

If you or your guest cause damage by your unreasonable carelessness or deliberate misuse, however, you must pay for it. The cost of replacing the dining room carpet because you and your friends thought those pizza and BBQ sauce stains would magically disappear is probably on you. You must leave a rental unit at least as clean as it was when you moved in.

Because "normal wear and tear" can be interpreted in many different ways, disputes often arise. The bottom line is that the better you itemize and document the condition of your unit when you move in, the better case you'll have against a landlord who tries to gouge you on the way out.

Deadlines

Landlords are typically required to return security deposits within 14 to 30 days after you move out. The landlord must send, to your last known address, either:

Your entire deposit (plus interest, in some states and in some cities), or:

A written, itemized statement describing how the deposit was applied to back rent, cleaning, or repairs, plus the remainder of the deposit.

How To Get It Back

If your landlord fails to return your deposit when and how the law requires, you can sue the landlord in small claims court. If the landlord has intentionally and flagrantly violated the law, in some states, you can recover two or three times the amount of the deposit, plus attorneys' fees and other damages.

Ordinary Wear & Tear (Landlord’s Responsibility)

• Curtains faded by the sun
• Water-stained linoleum by shower
• Minor marks on or nicks in wall
• Dents in the wall where a door handle bumped it
• A few small tack or nail holes in wall
• Worn gaskets on refrigerator doors
• Faded paint on bedroom wall
  
  

Damage or Excessive Filth (Tenant’s Responsibility)

• Cigarette burns in curtains or carpets
• Broken tiles in bathroom
• Large marks on or holes in wall
• Door off its hinges
• Rips in carpet or urine stains from pets
• Lots of picture holes or gouges in walls that require patching as well as repainting
• Broken refrigerator shelf
• Water stains on wood floors and windowsills caused by windows being left open during rainstorms
• Sticky cabinets and interiors

By Elspeth Crawford

Many homeowners these days fall into the unfortunate situation of not being able to afford their home loans. When the Grim Reaper of mortgages comes around, foreclosure is his scythe.

Foreclosure is a catch-all term for the legal process by which a lender attempts to recover the balance of a loan from a borrower who has stopped making payments by forcing the sale of the asset used as the collateral for the loan, typically a house. Foreclosures are governed by the law of the state where the mortgaged thing is.

Default

The foreclosure process is triggered once the borrower (mortgagor) falls so far behind on her payments that she enters default. The conditions for entering default vary, based on state law and terms in mortgage agreements. Once a borrower enters default, she starts to accumulate late fees, legal fees, and other charges that are added to her outstanding debt, as determined by the mortgage agreement and state law.

It’s important to note the lender does not have to foreclose; they are free to negotiate with the borrower. For example, they might agree to adjust the terms of the mortgage, refinance, allow the borrower to sell the property, or allow the mortgagor to make up for his or her missed payments.

Types of Foreclosures

Generally, there are two varieties of foreclosures: judicial foreclosures, which require a court order, and non-judicial foreclosures, which do not. In judicial foreclosures, the mortgagee must go to court and prove that it owns the mortgage and has the right to foreclose on it. Non-judicial foreclosures allow a mortgagee to foreclose without going to court. This is cheaper and quicker than a judicial foreclosure. Non-judicial foreclosures may only be used where the mortgage has a power-of-sale clause. These clauses most often appear in deeds of trust, a type of real estate secured lending instrument similar to a mortgage.

Acceleration Clauses

Most mortgages now include acceleration clauses. According to these clauses, if borrowers fall far enough behind in their payments, the rest of the loan is due immediately. Mortgagors usually invoke these clauses as a prelude to foreclosure. Most states regulate acceleration clauses, either generally, as specifically as applied to mortgages, or both.

Mortgage-Backed Securities

In recent years, lenders frequently bundled groups of mortgages into mortgage-backed securities, and then sold shares of the securities to investors. As a result, some mortgages have many owners. Others have changed hands so many times that it is difficult to determine who actually owns them. As a result, it is often difficult for the mortgagors to modify the terms of their mortgage. Similarly, mortgagees might have trouble proving that they own a mortgage they want to foreclose on.

Right of Redemption

In some states, mortgagors have a right of redemption that allows them to get back foreclosed property. If the original mortgagee owns the property, mortgagors may exercise the right by paying the bank the unpaid balance of their mortgage. If the property was already resold at auction, mortgagors must pay the purchaser whatever he or she paid for it. Rights of redemption only last for a limited time, which varies by state.

The Process

The foreclosure process differs state by state, but we can take a look at the general steps that are taken. If you're faced with foreclosure, it's important that you research your state's laws and practices.

Foreclosure proceedings can begin after a single missed payment, but it isn't very likely. Most banks and lenders have a grace period for late payments, usually with a fee added on. It typically takes being a full 30 days late for the alarm bells to go off. After the second missed payment, you'll be getting some phone calls. Many lenders will only accept both late payments to bring the loan current. They also may refuse any partial payments.

Once you fall three months behind, things get serious. This is typically when most lenders will begin the foreclosure process in one of two ways: judicial sale, which requires that the process go through the court system, or power of sale, which can be carried out entirely ­by the mortgage holder.

All states allow judicial sale, while only 29 allow power of sale. If your state allows power of sale, the loan papers will usually have a clause that says this method will be used. Power of sale is typically faster than the judicial route. Let's look at both methods.

Judicial Sale:

• The mortgage lender will file suit with the court system.
  
  
• You'll receive a letter from the court demanding payment.
  
  
• Typically, you'll have 30 days to respond with payment to avoid foreclosure.
  
  
• At the end of the payment period, a judgment will be entered and the lender can request sale of the property by auction.
  
  
• The auction is carried out by the sheriff's office, usually several months after the judgment.
  
  
• Once the property is sold, you're served with an eviction notice by the sheriff's office, and you must vacate your former home immediately.
  

Power of Sale:

• The mortgage lender will serve you with papers demanding payment.
  
  
• After an established waiting period, a deed of trust is drawn up that temporarily conveys the property to a trustee.
  
  
• The trustee will sell the house at public auction for the lender.
  
  
• Many times, these foreclosures are subject to judicial review to make sure everything was carried out legally.
  
  
• There is usually a requirement for the lender to post a public notice of sale for the auction.
  

Both types of foreclosure require that any other involved parties be notified of the proceedings. For instance, if the homeowner took out another loan against the house with a third party, that lender must be contacted and its loan amount must be paid from the auction proceeds. If the third-party lender isn't paid, it can apply the mortgage to the new property owner. Many times, the lender will actually buy the property back and attempt to sell it through the real estate market at a later date.

There can also be deficiency judgments made against the borrower if the sale of the property doesn't satisfy the amount of the loan. The entire difference between the two can be required, although some states only require that difference between the fair value of the property and the loan amount be paid.

There's one more type of foreclosure that's almost completely obsolete, called strict foreclosure. In these cases, once judgment is made on the lawsuit, the property is automatically assumed by the mortgage holder. Only Connecticut and Vermont still allow this practice.