Amount and separate account

The security deposit in Tennessee is not restricted as to the amount. The majority of rental situations will dictate a security deposit in the amount of one or two months’ rent, depending on the amenities in the rental. Tennessee requires that landlords deposit security deposits into a separate bank account, used only for that purpose, at a federally insured bank located in Tennessee. Furthermore, the landlord must notify the tenant at the time of executing the rental agreement of the name and address of the bank where the deposit is located. The landlord can not retain any portion of the security deposit if the security deposit is not deposited in a separate account.

Move-out inspection

The tenant has a right to inspect the premises to determine any liability for physical damages that would be deducted from the security deposit, and there are several ways that an inspection can be conducted, depending on the circumstances. Remember that time is of the essence with inspections, since the costs of any physical damages to the premises may only be recovered if the damage was discovered 30 days after the tenant vacated or abandoned the rental or 7 days after a new tenant takes possession.

  1. If the landlord has requested that the tenant vacate the premises, or within five days after the landlord receives written notice of tenant’s intent to vacate, the landlord may provide notice to tenant of their right to be present at the inspection. The tenant can request a time for the inspection during normal business hours. For ease of inspection, the landlord can require that the inspection occurs after the tenant has completely vacated the premises and is ready to surrender possession. In this case, the inspection must be either on the day of final move out or within four calendar days of tenant vacating the Premises. Here’s an important point which should be noted in the lease agreement: If the landlord provides written notice to tenant of their right to be present at the inspection and tenant schedules an inspection but fails to attend, then tenant waives the right to contest any damages found by the landlord.

    During an inspection the landlord and tenant shall together inspect the premises and generate a comprehensive listing of any damage to the premises that would create a charge against the security deposit, along with the estimated dollar cost of repairing the damage. Both landlord and tenant should sign the listing. If the tenant refuses to sign the listing then the tenant must state specifically in writing the items on the list that they contest.

  2. There are several cases where a tenant does not have a right to inspect the premises.
    • Tenant has vacated the premises without giving written notice.
    • Tenant has abandoned the premises.
    • Tenant has been judicially removed from the premises.
    • Tenant has not contacted the landlord about the right to a mutual inspection.
    • Tenant was a no show for the inspection.
    • Tenant has not requested a mutual inspection or is inaccessible to landlord.

Allowable charges

Charges against the security deposit are limited to any breach of the rental agreement, such as damage to the premises or any common areas, furniture, fixtures, carpet, or appliances. The security deposit can also be used for damages caused by abandonment of the premises, nonpayment of rent, late charges, and attorney’s fees. The tenant is not permitted to apply the security deposit to the last month’s rent or any other charges. Tennessee law allows the landlord to use the security deposit for unpaid rent or other owed amounts if the tenant has vacated the premises.

Returning the deposit

The landlord has 30 days after the rental agreement terminates and possession of the premises has been surrendered to notify the tenant in writing of the amount of any refund due them from the deposit. If the tenant does not respond within 60 days the landlord can remove the deposit from the separate account and retain it, free from any claim by tenant or anyone on tenant’s behalf.