If having the rent paid on time every month is every landlord’s dream, the angst surrounding the security deposit can be the most stressful part of the rent cycle. It’s not the taking of the security deposit that is difficult, it is dealing with the return of the deposit and settling up with the tenant. Aside from making sure the security deposit check clears before handing over keys to the rental, what other considerations are there for Kentucky landlords?

Accepting a security deposit

Security deposits in Kentucky are governed by KRS § 383.580, which begins by requiring a written documentation of existing damage to the premises prior to the landlord accepting a security deposit from the tenant. This list must be comprehensive and detail the existing damage along with the estimated cost to repair the damage. The tenant has the right to inspect the premises to confirm the existence of any damage. Both parties must sign the list of preexisting damages, and if the tenant disagrees with the list (meaning, the tenant has something to add to the list) the tenant should note those differences on the list with a signature.

Kentucky landlord tenant law does not dictate a maximum amount for the security deposit, but the landlord must deposit the security deposit in a separate account used only for the purpose of holding the security deposit. The separate account must be at a bank or other lending institution subject to regulation by the Commonwealth of Kentucky or any agency of the United States government, and the landlord must inform the tenant of the location and account number for the separate account. It’s important to comply with the requirement of the separate account, because in Kentucky the landlord is not entitled to retain any portion of a security deposit if it was not deposited in a separate account.

Returning the security deposit

Just as with the beginning of the tenancy, the landlord must provide a written list of damages to the property after an inspection, beyond wear and tear, that exist at the end of the tenancy, and that list must be provided to the tenant. Estimated costs to repair any damage must also be noted and the tenant must be provided an opportunity to inspect for themselves to confirm any damage. Both parties are required to sign the comprehensive list of damage and charges against the security deposit. If the tenant dissents they must note their disagreement on the inspection list and include a signature. If the landlord fails to provide the move-in and move-out inspection list the landlord forfeits the right to retain any portion of the security deposit.

If the tenant owes rent

If the tenant leaves but still owes the last month’s rent and does not demand a return of the security deposit, the landlord may remove the deposit from the account after 30 days and apply any excess balance to the rent that is owed.

If balance due to tenant

If the tenant leaves and does not owe rent but has a refund of the security deposit due to them, then the landlord must send written notification to the last known address, stating the amount of any refund due tenant. If the landlord does not get a response within 60 days the landlord can remove the security deposit from the separate account and retain it without any claim from tenant.