Streets Money In Hand

Reform Security Deposits on Tenants’ Behalf

Any tenant who has had a landlord illegally withhold their security deposit or whose landlord has refused to make required repairs can tell you there is a lot more to the legal system than what is written in the state statutes or city ordinances.

A law may say you have certain rights. But it’s another thing to take a day off work, travel downtown, wait in a courtroom and explain to a judge your side of the story, especially if you’re low income or don’t speak English, or your immigration status prevents you from pursuing your rights.

Having a lawyer helps, which is why programs to make sure everyone has an attorney in eviction cases is so important. Even that doesn’t remove the substantial barriers to enforcing tenant rights in court. Reducing those barriers to enforcing tenant rights is as important as providing new rights.

Reforming how we regulate security deposits is one way we can protect tenants at minimal cost to either landlords or cities.  

Landlords are required to return the security deposit to the tenant, with interest, within three weeks of the termination of the tenancy. Alternatively, if the landlord is going to keep any portion of the deposit, he or she has to give the tenant a written statement explaining why the money is being withheld.  

This system puts the burden of proof on the landlord, but the burden to bring the case to court is on the tenant. The base filing fee for conciliation court is $65, plus additional fees in certain counties. That $65 is on top of however much the landlord is withholding, at a time when the tenant has to pay a security deposit on a new place. And the tenant still has to take time off work, costing that person even more money.  

Unscrupulous landlords take advantage of these barriers, knowing many tenants won’t bring a complaint even if they have a great case.

Here’s how we can protect tenants:Streets Money In Hand

  1. Require the landlord to deposit the security deposit with either the city that licenses the rental or with the state. Under this system, both the landlord and tenant would have to submit a form with the deposit at the beginning of the tenancy and then again at the end of the tenancy before the deposit is paid out. (Alternatively, the deposit could automatically be paid out at the end of three weeks from when the tenant provides notice that the tenancy is over, subject to the landlord’s objection.) The landlord loses the ability to use the barriers of the legal system to legally withhold the tenant’s deposit, and tenants can exercise their rights by submitting a form online. New Zealand is one country that already uses a version of this system.
  2. Require the landlord to submit a signed copy of the lease for review. Landlords are required to provide a copy of the lease in breach-of-lease claims they bring to court (where a written lease exists). Providing copies before a dispute occurs can head off issues before court is necessary. If cities like Minneapolis adopt limits on security deposits, then the lease review can prevent the tenant from overpaying on the security deposit in the first place.
  3. Establish a fund for Interest On Landlord-Tenant Accounts. Attorneys who hold funds on behalf of their clients are required to hold them in a special kind of account called an Interest on Lawyers Trust Account (IOLTA), where the interest earned on the funds goes toward legal services for low-income people. Setting up a similar fund for security deposits can provide resources to low-income renters who have difficulty paying security deposits, hiring an attorney or making rent. Currently, the state requires landlords to pay interest on the security deposit when it is returned to the tenant at the end of the tenancy. Although some tenants may prefer having interest paid out to them individually, the small amount earned by any individual tenant is less useful than an emergency loan available to all.  

These reforms provide no additional rights to the tenant and require minimal additional compliance by the landlord — namely, the requirement that the landlord deposit the security deposit at a government agency instead of a bank and submit a less-than-one-page form and a copy of the lease. Making rights easier to enforce and enforceable outside of court makes our housing system fairer and can reduce housing insecurity.  

 

Zachary Wefel

About Zachary Wefel

Former candidate for Minneapolis Ward 1 City Council, lawyer at Wefel Law Firm PLLC, and co-founder of the Minnesota Tool Library. Follow me on Twitter @zacharywefel.