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Security Deposit Laws in Louisville Kentucky

Although not a requirement under Kentucky state laws, many landlords require their tenants to pay a security deposit before keys can be exchanged. There are many benefits to doing so. 

For one, a security deposit can help cover for any excessive damage a tenant may cause to the property. Examples of these include holes in walls, broken floor tiles, unauthorized paint colors, and broken windows. 

Secondly, a security deposit can help cushion a landlord against losses in rental income. A landlord may lose their income, for example, when a tenant breaks the lease early. 

Thirdly, requiring a security deposit may help cushion a landlord against losses in rent payments. A common lease violation is non-payment of rent. When such a case arises, a landlord can simply deduct the appropriate amounts from their tenant’s security deposit. 

Lastly, a security deposit can help cover any unpaid bills. Most of the utilities will be in the tenant’s name during the lease period. Good examples of such utilities include gas, electricity, and internet. Should the tenant fail to pay them, under Kentucky security deposit law, a landlord has a right to deduct the appropriate amounts from the tenant’s deposit. 

That said, Kentucky, just like any other state in the U.S., has a security deposit law in place. Alltrade Property Management has made this article to help you understand these laws, as they can help you avoid potential conflicts with your Louisville tenants. 

Kentucky Laws Regarding Rental Deposits

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How much security deposit can a landlord charge?

In Kentucky, there is no limit to how much security deposit you can charge your tenants. That said, most landlords usually charge their tenants the equivalent of between 1- and 2 month’s rent. For example, if the monthly rent is $1,000, then most landlords will usually charge a security deposit of between $1,000 and $2,000. However, there is no minimum or maximum security deposit in Kentucky.

This amount is reasonable and won’t deter potential tenants from renting your unit. You may also want to check whether your municipality has additional rules in this regard. 

Are there any requirements I have to meet before collecting a security deposit from my Louisville tenant? 

Yes, there are two things you must do as a landlord. First and foremost, you will need to provide your tenants with a list of any pre-existing defects or damages in the unit, as well as the repair estimates. 

Secondly, you must inform your tenants that they have a right to inspect the unit before moving in. This is to confirm the accuracy of pre-existing defects or damages you provided. 

Once the tenant has inspected the unit, the Kentucky rental deposit law provides them with two options. The first is to agree to your list as accurate by signing the statement (you must sign it as well).

Their second option is to refuse to sign the statement. The tenant can disagree with the list wholly, or they can choose the specific elements in the list that they disagree with. The tenant must then sign the statement for it to be validated. 

Is there a specific way to store a tenant’s security deposit? 

Yes. In Kentucky, as a landlord, you are required to place a tenant’s security deposit in a banking institution that’s regulated by the state or federal government.

tenant rights security deposit

Do I have to notify my tenant after receiving their security deposit? 

Yes, Kentucky rental deposit law requires you to inform your tenant of receipt of their security deposit. In the notice, you’ll need to include your bank’s name and address, as well as the account number. 

Are there any reasons why I may choose to keep all or some of a tenant’s security deposit? 

Yes. Occupancy laws in Kentucky allow you to keep some or all of a tenant’s deposit for a myriad of reasons. They include:

  • When a tenant refuses to or is unable to pay rent.
  • When a tenant causes damage exceeding normal wear and tear.
  • In the event a tenant breaks the lease agreement.
  • When there is excessive cleaning required after a tenant moves out.
  • Failure by the tenant to give adequate notice when moving out.
  • Failure by the tenant to clear their utility bills when moving out.

Related: Eviction Process in Louisville, KY

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Is a walk-through inspection necessary? 

Yes, a walk-through inspection is necessary. In the state of Kentucky, both the landlord and the tenant must perform it. As a landlord, you will have the first opportunity to go through the unit and compile a list of damages you believe the tenant made. 

Your tenant will then take your list and go through the unit to confirm its validity. If both of you agree, then you’ll both sign the list and make the appropriate deductions from the tenant’s security deposit. 

If, however, your tenant doesn’t agree to the list, then he or she must write a statement of dissent. He or she must make a list of the items that they think were wrongly marked, then sign and date the statement. 

Should the tenant pursue legal action, they will only be able to recover money for the items that they dissented to on the statement. 

When are landlords required to return a tenant’s security deposit? 

For tenants that don’t owe you rent at the end of the lease period, you’ll be required to notify them of how much deposit you’ll refund them. You must send this notice to the tenant’s last known mailing address. 

According to Kentucky law (krs 383.580, your tenant will then have sixty days to respond to the notice and claim their deposit. If they don’t respond after the sixty days, they will forfeit it, and you’ll be able to claim it. 

For tenants that owe you rent at the end of the lease period, they will have 30 days to claim their deposit if they didn’t pay their last month’s rent. If your tenant doesn’t act within the 30 days, you’ll be able to claim their money from your bank. 

failure to return security deposit

What happens if I decide to sell the property? 

You will have two options in this situation:

One, to transfer the deposit to the new owner.

Two, to return the deposit back to your tenant.

If you choose the first option, you must provide a written notice to both the incoming owner and the tenant disclosing the location of the security deposit. 

Disclaimer: This blog is in no way a substitute for legal advice. If you still have more questions or need further clarification, please consider hiring expert help from a qualified Louisville, Kentucky attorney.

Alternatively, you could hire the services of a residential property management company.

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