What to do when a tenant moves out owing more than the security deposit?

Most landlords and property managers do nothing when a tenant moves out owing more than the security deposit. Either time, money, or just not knowing what options are available prevents a landlord from pursuing the outstanding debt. The following are options available to landlords that would like to satisfy the outstanding balance.

Obtain A Judgment
If you have a current address for the tenant, either a forwarding address or the address of an employer, you are able to serve process. Obtaining a judgment in small claims court is the most effective way to collect the outstanding debt. Once the judgment is issued, the landlord can garnish wages, bank accounts and state income taxes, place liens on real property, and/or seize personal property. The judgment becomes a public record and is recorded by the consumer credit bureaus so any time a credit report is obtained the outstanding debt will be noted. This may make it difficult for the former tenant to obtain rental housing, as most landlords would not rent to a potential tenant that has an outstanding balance with another landlord.

It is generally inexpensive to file a small claims case and should you win, the court costs are added to the outstanding balance, however, it does take time to prepare the case and appear in court.


Collection Agency
If you do not have a current address and are unable to obtain it on your own, but you do have other contact information, a landlord can hire a collection agency to pursue the outstanding debt. Depending on the agency, expect to pay about 25%-33% of the amount collected. If they Collection Agency also reports the outstanding debt to all three Consumer Reporting Agencies, you may pay as much as 50% of any amounts collected.

This costs nothing upfront and requires only the time necessary to find the agency and complete/submit the paperwork.


Report The Debt To The Consumer Credit Bureaus
A landlord is unable to submit a derogatory report directly to the three major Consumer Reporting Agencies (Experian, TransUnion, and Equifax). However, there are a few associations online that can do this for you. You must become a member and pay an annual membership fee of approximately $80. Once you become a member, it is very inexpensive ($8) to report a derogatory to a Consumer Reporting Agency. This takes little time and can be effective in the long term. If another landlord runs a credit report, they will see the outstanding debt. It will be difficult for the former tenant to obtain rental housing with this on their record. Also, should the former tenant decide to purchase a home in the future, they will have to satisfy the debt in order to obtain a loan for a mortgage.


Online Resources
Use online resources to report the tenant’s rental history. Prepare a tenant report at http://www.AboutTenants.com. Tenant reports take just a few minutes to complete and include questions relating to the type of expenses charged to the tenant upon move-out, the total amount charged to the tenant before applying the security deposit, and the total outstanding balance as of the date the tenant report was prepared. The reports have no effect on the former tenant’s credit rating; however, tenant report’s act as a reference and provide enough detail about the tenant’s rental history so that other landlords can make an informed decision as to whether or not to rent to this tenant. The report also provides the option to be contacted by other landlords if the tenant applies for housing.

This is a free resource for landlords nationwide.