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Security deposits are sums of money that tenants provide to their landlords with the idea that they would receive their money back at the conclusion of the tenancy, provided they have paid the landlord all sums due and have not damaged the property.

In Oregon, OR Rev Stat § 90.300 governs residential security deposits. Property managers and landlords are required to follow these regulations when requesting, collecting, and returning security deposits. This article will provide all the information every Oregon residential landlord needs to ensure that they are complying with the law.

Security Deposits

A security deposit is the money that a landlord in Orgeon receives from a tenant and keeps on hand to pay for any possible damage to a rental property or a missed rent payment. In Oregon, such deposits are not required by law, so if you do not wish to request one, you don't have to. However, they are allowed.

A security deposit paid by a renter or requested by a landlord must be specified in a written rental agreement if one exists. Moreover, rental agreements must provide details of what may be deducted from tenants' security deposits.

Maximum Amounts

A landlord can charge any amount for a security deposit in Oregon if it is included in the rental agreement. Although there is no restriction placed on the amount a landlord may request, the standard security deposit amount is generally the value of one to two months' rent. Unless the tenant and landlord agree to amend the lease to account for this, landlords in Oregon are not permitted to demand that the renter pay extra deposits.

If the lease is amended, the extra security deposit shall be related to such modification. A week-to-week renter must get written notice of any increase in rental rates at least seven days before it takes effect. Without providing written notice, the landlord may not increase rates.

Pet Deposits

According to Oregon legislation, a landlord may request a separate pet deposit. However, it's important to remember that you may not ask for a pet fee or increased security deposit if the tenant uses a  service or emotional support animal. Nevertheless, in such cases, the renter is responsible for any destruction the emotional support or service animal causes to the rental unit.

Allowable Security Deposit Deductions in Oregon

According to Oregon security deposit laws, a landlord may claim the following losses or damages from the security deposit:

  • Cleaning costs, where deep cleaning is required
  • Unpaid rent
  • Damages not caused by normal wear and tear, typically caused when the tenant fails to abide by the terms of the rental agreement
  • Labor costs for cleaning the rental unit and repairing damages

Normal Wear & Tear

Damage that occurs as a consequence of typical use is referred to as "normal wear and tear." Losses resulting from negligence, recklessness, accidents, abuse, or mistreatment of the property or its components by the renter, family members, or their guests are not included, and Oregon landlords may not claim for such damages.

On the other hand, "damage" refers to the harm done to the rental property as a result of a tenant's carelessness or misuse. Damage may lower the rental unit's worth, usability, or ability to function normally. This is why landlords may deduct these losses from a tenant's security deposit.

Returning Deposits

The portion of the security deposit that has not been used must be returned to the tenant within 31 days, together with a written itemized account of the damages subtracted that outlines the claim's justification. This time frame starts on the termination date specified in the rental contract. These documents must be delivered in person by the landlord or sent via first-class mail to the forwarding address the tenant has provided.

However, suppose a government authority determines that the rental unit is dangerous because of issues that could endanger the tenant's health or safety. In that case, the landlord is required to pay back the security deposit within 14 days of receiving a termination notice. The payment method used when returning any unpaid money is up to the tenant's discretion. Oregon landlords are required to mail the renter the security deposit if he or she doesn't select one of these options.

Tenant Obligations

Only if the tenant's breach of a specified obligation resulted in the damage may the landlord recover the costs for repairs. The renter must follow these conditions:

  • Avoid changing the locks on any building doors unless necessary in emergencies.
  • Get rid of trash in an orderly and secure way (this includes hazardous and infectious waste).
  • The rental unit must be returned to the landlord in the same state that it was received.
  • Ensure that stormwater drainage systems are installed and maintained on the roof.
  • Use all amenities and appliances (such as those in communal areas) in a responsible way.
  • Eliminate fire hazards on the property.
  • Keep the carbon monoxide and/or smoke detectors in good working order.
  • Any vegetation, trees, or shrubs on the property should be watered, pruned, or mowed, and any falling leaves or branches should be picked up.
  • Not engage in any illegal activities on the premises.
  • Respect the maximum number of individuals permitted to be on the property.
  • Prevent rodents, pests, and a buildup of filth off the property.
  • Not remove, destroy, or demolish any portion of the property willfully or negligently.
  • Keep the area neat and secure, paying special attention to all plumbing fixtures.
  • Be careful not to interrupt the neighbor's enjoyment of the property unreasonably.

If the renter caused destruction by failing to follow the aforementioned conditions, the landlord may take the cost of restoring the property from the security deposit.

Other Laws

Here are other regulations you need to take note of:

Final Month's Rent Deposit

Suppose a landlord accepts the final month's rent (often referred to as prepaid rent) at the start of the agreement. In that case, they are required to use it at the end. It can be utilized to cover the termination of the contract due to an inability to pay rent. However, keep in mind that it cannot be held as a part of the security deposit.

Providing a Receipt When Collecting Security Deposits

Offering the tenant a documented receipt detailing the security deposit amount, as well as any prepaid rent received at the start of the lease, is mandatory for landlords in Oregon.

Additional Deposits

It's important to remember that additional deposits cannot be demanded without the renter's permission. Landlords in Oregon are required to give tenants three months to pay new security deposits and prepaid rent if they are needed after the first year of tenancy.

Selling Rental Unit

The landlord is in charge of handling the security deposit in a responsible manner if they choose to sell the rental home. Landlords may give the new owner the resident's deposit along with their contact details. If not, the landlord may provide the renter with a direct refund of the deposit and notify the new owner of this.

Taxes

When managing your tenants, it is important to take note of what the IRS says about security deposits. Are they considered taxable income upon receipt? The answer is no.

A security deposit and prepaid rent are not treated as taxable revenue by the landlord when they are received. Security deposits are only taxable earnings if the landlord is no longer required to return them. These funds are still the property of the tenant, even though it is being held by the landlord. When the security deposit is rightfully retained at the termination of the lease, they might also be eligible for a tax write-off.

Final Thoughts

The objective of Oregon's security deposit regulations is to safeguard both tenants and landlords. Now that you have a working knowledge of what they entail, you can rest assured that you will not run into any legal trouble because of security deposits. At DoorLoop, we understand how stressful running a rental business can be, which is why we provide software to help. Our software offers a wide range of features like bookkeeping, real estate listings, and many others. Contact us today to test it out for free!

FAQs

Are landlords in Oregon allowed to charge an additional security deposit for pets and include details in the rental agreement?

Yes. According to Oregon law, landlords may include an additional security deposit, provided this is stipulated in the rental agreement. There are no restrictions placed on the amounts.

What happens if a landlord fails to return a security deposit within the allotted time?

If a landlord fails to refund the security deposit or does not do so within the permitted 31 days or 14 days if the rental property has been declared hazardous, the renter may be entitled to up to twice the amount withheld, including any court costs incurred in retrieving the deposit.

Can a tenant use their security deposit to pay for the last month's rent?

Yes. A landlord may use a tenant's security deposit funds to cover the last month's rent if this is allowed in the lease agreement. In cases where prepaid rent was accepted at the start of the lease, these funds must be used solely as the last month's rent deposit. Moreover, a landlord may not deduct the cost of repairs or cleaning.

What are landlords in Oregon not allowed to deduct from the security deposit?

A landlord may not charge a tenant for damages that can be considered general wear and tear. Such losses result from the intended use of the property and not because of a negligent tenant act. They may, however, deduct unpaid rent, damages, and cleaning fees.

Are Oregon landlords required to hold security deposits in an interest-bearing account and pay the tenant interest?

No. Unlike other states, Oregon laws do not require landlords in the state to retain security deposits in an interest-bearing account. They are also under no obligation to provide the tenant with any interest earned.

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Resources

  1. https://law.justia.com/codes/oregon/2021/volume-03/chapter-090/section-90-300/
  2. https://oregon.public.law/statutes/ors_90.300
  3. https://www.osbar.org/public/legalinfo/1260_feesdeposits.htm
  4. https://oregon.public.law/statutes/ors_90.300
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!