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 AL Code § 35-9A-201 deals with the laws regarding the tenant's deposit in Alabama. These laws are intended to protect all relevant parties to a lease agreement.

Maximum Deposit

According to Alabama law, landlords are not permitted to request or receive a security deposit that is greater than the amount of one month's rent. There are, nevertheless, certain exceptions to the one-month's rent rule. Pets, changes to the property, and other things that can put the lessor or the property at risk of liability may require an additional deposit. However, you must be careful not to charge a disabled tenant for having a service animal when it comes to pets.

Allowable Deductions

Alabama landlords can deduct certain amounts from the tenant's security deposit, such as:

  1. Damage caused to the property by the tenant: When it comes to damage that goes beyond normal wear and tear, you can hold your tenants accountable. Such damage consists of missing tiles, holes in walls, torn curtains, and missing door handles. However, as normal wear and tear results from the property's aging, you cannot hold your tenant accountable for this damage.
  2. Unpaid rent: A tenant is obligated to pay rent for the entire lease term after they sign a lease agreement. In order to make up for your losses, you may keep some or all of the deposit if the tenant stops making payments on time. This is only an exception if the tenant has a valid reason to withhold rent payments; for instance, if you have disregarded your tenant's maintenance requests, they are entitled to withhold future rent payments until you make the necessary repairs under Alabama security deposit law.

To be clear, landlords are not always allowed to use the tenant's security deposit to pay for repairs for damage done by the lessee. The rental agreement must have a clause authorizing the landlord to do this. Additionally, under landlord-tenant laws, the landlord is not permitted to deduct normal wear-and-tear damage.

Tenant's Obligations

Only in cases where the tenant's breach of their lease terms resulted in damage is the landlord permitted to recover the cost of repairs. This duty entails keeping the rental property in good condition and returning it as received. Tenants are required to uphold the following duties:

  1. Keep the rental property safe and clean
  2. Comply with the applicable housing and building codes that affect health and safety
  3. Keep all plumbing fixtures in the proper condition
  4. Dispose of all garbage, ash, and other rubbish in a safe and clean manner
  5. Use all appliances and facilities, such as all plumbing, electrical, heating, ventilation, and air-conditioning systems, in a fair manner.
  6. Carry themselves and invited visitors in a way that won't interfere with the neighbors' enjoyment of the property.
  7. Not damage, remove, deface, or destroy any part of the property intentionally or negligently.

The lessor may deduct the repair costs from the security deposit if the damage to the property was brought on by the tenant's failure to follow any of the aforementioned rules.

If the landlord wants to protect the rental property, ensure the tenants' safety, health, and welfare, or provide a fair distribution of amenities and services to all tenants, they can add additional rules or regulations that are enforceable in the rental agreement.

Storing Deposit

According to Alabama's security deposit law, there are no restrictions on how landlords must keep their tenants' security deposits. Therefore, the choice of whether to keep your tenant's deposit in a regular account or one that pays interest is totally up to you.

Returning Deposits

Landlords are obligated to send a tenant's security deposit back to the address they gave in writing through first-class mail in Alabama.

No Valid Mailing Address

Alabama landlords must send the deposit and an itemized list to the tenant's last known address by first-class mail if the tenant fails to give the landlord a valid forwarding address. It must be given to the tenant at the rental unit's address if the last known address isn't supplied.

Time Frame

Alabama landlords have 60 days to return the security deposit less any deductions, following the end of the lease and the surrender of possession. They must send the security deposit back to a tenant by first-class mail to the specified address the tenant stated in writing

Failure to Return a Security Deposit

Alabama landlords must pay double the tenant's original deposit if they don't refund the security deposit within the allotted 60-day window. In Alabama's Small Claims Court, a tenant may file a claim for up to $6,000.

Unclaimed Deposits

Any deposit unclaimed by the lessee after 90 days or if the lessee does not cash the deposit check, the tenant loses the right to the security deposit. The lessee is obligated to give the landlord a legitimate forwarding address.

Receipt

If any deductions are made, a written notice must be sent with the return in order to explain to the lessee why the landlord kept any or all of the security deposit. It must include the damage the tenant caused to the property as well as the anticipated cost of repairs.

Additional Rules

Interest Payments

Alabama does not mandate that landlords give tenants interest on their security deposits. However, it is possible to do it voluntarily.

Receipt Requirement

Under Alabama security deposit laws, a property manager or landlord is not obligated to give tenants a formal receipt for a security deposit.

Fire or Casualty Damage

The landlord must refund the security deposit if a fire or other disaster damages or destroys the property without the tenant's fault or malicious intent.

Apply Security Deposits as Last Month's Rent

A security deposit cannot be used to cover the last month's rent. In the case that the tenant leaves the property early or causes damage, the deposit is often applied to the unpaid rent.

New Property Owners' Responsibility

The buyer inherits the obligation to return the tenant's security deposit or prepaid rent to the lessee when the tenancy expires and is in charge of seeing that all security deposits are correctly transferred to them if the residential unit is being sold.

Inspections

Tenants have the right to a walk-through inspection in certain states such as Tennessee. A few days before a tenant moves out, an inspection is conducted to help document the property's state.

The tenant will be forced to have any damage repaired before the final move-out if it is discovered during the inspection that it goes beyond ordinary wear and tear. If they don't, the landlord has the authority to deduct the corresponding amount from their deposit.

However, Alabama does not mandate a walk-through inspection before a tenant vacates a property, so tenants are not entitled to one.

Final Verdict

Due to the complexity of Alabama's security deposit laws, breaking them could result in serious financial repercussions. Along with paying the tenant up to double the security deposit/one month's rent and any court-imposed penalties. Just like Alabama landlord-tenant laws and eviction laws, Alabama security deposit law is meant to protect the landlord-tenant relationship. This is why it is crucial to have a thorough understanding of it.

FAQs

Does the Money Need to be Kept in a Separate Account to Allow Interest to Accrue?

No, Alabama security deposit laws do not mandate that property managers or landlords open separate bank accounts for security deposits.

Do Landlords Have to Charge Tenants a Security Deposit under Alabama Law?

No, they don't have to. Although they are not required to, it is probably a good idea. The absence of one means the landlord faces increased liability risks.

Security deposits serve as insurance for the landlord in case a tenant alters or damages the rented space without authorization. Landlords are liable for covering the costs of any cleaning or repairs above and beyond normal wear and tear in the absence of a security deposit.

Do Landlords Need to Notify Alabama Tenants when the Money Is Used to Fix Damages?

Yes, a  detailed account of the damages and the cost of repairs must be provided by the landlord within the specified time period.

The lessor owes the tenant double the amount of the first security deposit if the landlord fails to give it to them within the required time period of when they vacate the property, together with the balance of the security deposit.

Can a Security Deposit be Used for Unpaid Rent?

Yes, a security deposit may be deducted from any unpaid or accrued rent when you leave.

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Resources

  1. https://www.nolo.com/legal-encyclopedia/overview-landlord-tenant-laws-alabama.html
  2. https://apmalabama.com/alabama-security-deposit-law
  3. https://getjerry.com/renters-insurance/alabama-security-deposit-laws
David Bitton

David is the co-founder & CMO of DoorLoop, a best-selling author, legal CLE speaker, and real estate investor. When he's not hanging with his three children, he's writing articles here!