Security Deposits Under Tennessee’s Uniform Residential Leasing Law

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Tennessee’s version of the Uniform Residential Landlord Tenant Act (TURLTA) applies to counties having populations in excess of 68,000, including without limitation, Montgomery, Sumner, Wilson, Davidson, Rutherford, Williamson and Maury. Tennessee Code Annotated § 66-28-101 et seq. Accordingly, familiarity with TURLTA is a must for middle Tennessee real property practitioners. In my landlord/tenant practice, the disposition of security deposits and the renter’s liability for property damage are commonly litigated. The provisions of TCA § 66-28-301 govern a considerable portion of these disputes.

To begin, landlords are required to place all security deposits in an account held exclusively for the purpose of holding security deposits and are required to disclose to the tenant the location of the account at the time of lease execution. Id at (a & h). A landlord who fails to place a security deposit in an appropriate account forfeits the right to retain any part of the deposit to cover back rent or property damages owed by a tenant. Id at (c).

Regarding property damage claims, it is important to remember that tenants have a right to be present for a mutual inspection of the premises. Id at (b). Tenants may exercise this right by requesting a mutual inspection. Id at (b)(1)(B). At the mutual inspection, a comprehensive listing of ascertainable physical damage, along with a repair cost estimate for each item, should be reduced to writing and signed by both parties. Id. The signatures of the landlord and tenant are conclusive as to the accuracy of the listing, except the tenant may be liable for additional damages found after the inspection. Id at (b)(1)(B) & (g).

If the tenant refuses to sign or objects to any claim of damage by the landlord, she must set out in writing the items to which she objects. Id. A tenant may bring a claim to recover portions of a security deposit retained by a landlord pursuant to disputed allegations of damage, however, the claim is limited to the items disputed in writing at the mutual inspection. Id at (d). A tenant failing to request or attend a scheduled mutual inspection loses the right to be present for compilation of the damage listing. TCA § 66-28-301(b)(2)(B)(v-vi). However, a landlord is required to send any listing of damage to be charged against the security deposit to the tenant, by certificate of mailing, if requested by the tenant. TCA § 66- 28-301(b)(2)(A).

Upon the landlord’s request for the tenant to vacate or within five days of the receipt of the tenant’s written notice of intent to vacate, a landlord may provide written notice of the right to attend an inspection and that if the tenant schedules an inspection but fails to attend, she will waive the right to contest the listing of damages. TCA § 66-28-301(b)(1)(A). It is relevant to note that the statutory waiver of the tenant’s right to contest a damage listing to be deducted from the security deposit cannot be triggered unless such waiver is set out in the lease agreement and the mutual inspection is scheduled within four days of the tenant vacating the premises. Id.

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The tenant’s right to be present for a mutual inspection may also be waived if: (1) the tenant vacates the premises without providing notice to the landlord; (2) abandons the premises as defined in TCA § 66-28-405; (3) is judicially removed; or (4) fails to respond to the landlord’s written notice of the right to be present at a mutual inspection. TCA § 66-28-301(b) (2)(B)(i-iv). If a tenant vacates and waives the right to be present at the inspection, the landlord may deduct physical damages from the security deposit without providing the tenant an opportunity to inspect the premises. TCA § 66-28-301(b)(2)(A) & § 66-28-301(e).

If a refund of the security deposit is due after all amounts owing have been deducted, the landlord must send written notice of the same to the tenant’s last known or reasonably determinable address. Unless the landlord receives a response from the tenant within 60 days of the sending of the refund notice, she may retain the balance of the security deposit free from all claims of the tenant. TCA § 66-28-301(f).

Understanding TURLTA’s statutory framework increases predictability in residential leasing litigation. Here are a few other subsections I would note: Regarding the termination of residential leases, generally, both parties have a duty to mitigate damages. TCA § 66-28-515(a). Also, a tenant’s failure to comply with TCA § 66-28- 401 materially affecting health and safety may constitute a breach resulting in termination of the tenancy. TCA § 66-28-505(a) (1). Prior to the termination of a tenancy for nonpayment of rent or the charging of a late fee, notice of nonpayment is required and tenants are entitled to a five-day grace period after the due date of rent. TCA § 66- 28-201(c-d). Notice of nonpayment may be waived, but the five-day grace period may not be waived by agreement. Id. Lastly, but just as important, TURLTA provides multiple mechanisms through which parties may be awarded their reasonable attorney’s fees. Sam Dreiling

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