Real Estate Law Blog

“I’m Keeping It”: Kentucky Law on Residential Security Deposits

When a tenant moves out of a residential dwelling and leaves it worse for the wear, what recourse does a landlord have? Many landlords assert their “right” to keep the security deposit when such an instance arises, but in order to do so, a landlord must strictly adhere to the established statutory requirements set forth in KRS §383.580.[1]

A landlord’s obligation regarding security deposits begins long before any damage is done. Prior to a prospective tenant tendering a security deposit, the tenant must be presented with a listing of any then-existing damage to the unit which would provide the basis for a charge against the security deposit and the estimated cost of repairing such damage. The tenant is then entitled to conduct an inspection of the premises to determine the accuracy of the listing.  Often, the landlord and tenant will conduct this pre-occupancy inspection together immediately prior to signing the lease.    If the tenant disagrees with all or part of the listing, the tenant can refuse to sign the listing and must state in writing the disputed items. If there is no disagreement, then the landlord and tenant must sign the listing which serves as conclusive evidence of the accuracy of the listing. It is crucial that a landlord retain the signed listing for the duration of the lease term.   After the pre-occupancy inspection(s) and the damage list has been provided, the tenant shall be required to tender the security deposit in full to the landlord.  The security deposit must be placed in an account used solely for that purpose and the tenant must be informed of the location of the account and the account number.

Upon termination of the tenant’s possession of the premises, a post-occupancy inspection must be performed and the landlord must provide the tenant with a final damage listing of any damage to the unit which is the basis for any charges against the deposit along with the estimated cost of said repair. Again, the tenant has the right to inspect the premises for accuracy of the listing and dispute any items in writing. If there is no disagreement as to the accuracy of the final damage listing, the landlord shall retain the portion of the security deposit necessary to cover the damages/repair work.

Unfortunately, landlord and tenant rarely see eye-to-eye as to the condition of the premises upon termination of possession. Thus, a tenant who disputes the accuracy of the final damage listing may bring an action in District Court. The tenant’s claim is limited to the items from which the tenant specifically dissented to, in writing, and signed in the final listing.

In the case of a fleeing tenant who leaves without paying the last month’s rent or requesting a return deposit, then a landlord may, after thirty (30) days, remove the deposit from the account and apply it to the debt owed.

When a tenant leaves and the unit has suffered from no damage (a rare occurrence, indeed), then the landlord must notify the tenant at his or her last known or reasonably determinable address of the amount of any refund due. If the landlord does not received a response from the tenant within sixty (60) days of notification, then the landlord is entitled to retain the security deposit without further obligation (an even rarer occurrence).

As a best practice, landlords should make detailed listings regarding the condition of the property, both pre- and post-occupancy, and strictly adhere to the aforementioned statutory requirements.   A security deposit can be the landlord’s to keep, but only if the landlord plays by the rules.

[1] KRS §383.580 only applies to cities, counties, and urban-county governments which have enacted the Uniform Residential Landlord and Tenant Act (“URLTA”).

Brendan Yates joined the Lexington office of the firm as an associate in 2002. Brendan is a member of the firm's Litigation Department, where he focuses his practice on construction and real estate litigation, workers' compensation defense litigation, insurance defense and commercial litigation. He has successfully defended his clients in state and federal courts, the Kentucky Court of Appeals, the Kentucky Supreme Court, and in administrative agency proceedings in Kentucky. He can be reached at byates@mcbrayerfirm.com or (859) 231-8780, ext. 1208.

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This article does not constitute legal advice.