New Landlord-Tenant Law Addresses Security Deposits and Damage

Washington State House Bill 2064 was signed into law by Governor Jay Inslee on March 17, 2022 makes changes to the Residential Landlord-Tenant Act as it relates to security deposits and damages to the property caused by tenants. The law takes effect 90 days after the legislative session concluded on March 10, 2022.

Residential Landlord-Tenant Act.

The Residential Landlord Tenant Act (RLTA) regulates the creation of residential tenancies and the relationship between landlords and tenants of residential dwelling units. The RLTA establishes rights and duties of both tenants and landlords, procedures for the parties to enforce their rights, and remedies for violations of the RLTA.

Current Law on Deposit and Fee Collection

Under the RLTA, a landlord may collect deposits, fees, and other amounts before, or at the outset of, a tenancy such as:

• A tenant screening fee, subject to provisions governing the amount that may be charged and the information that must be provided to the tenant;
• A deposit or fee to hold the dwelling unit after the tenant has been offered the unit and is no greater than 25 percent of the first month’s rent—if the tenant moves in, the landlord must credit the fee or deposit to the first month’s rent or the security deposit;
• A damage or security deposit, to cover any damage caused to the property by the tenant in excess of normal wear and tear;
• A nonrefundable fee, including a cleaning fee that is not for normal cleaning; and
• First and last month’s rent.

Current Law on Security Deposits

A landlord may collect a damage or security deposit to cover any damage caused to the property by the tenant in excess of normal wear and tear resulting from ordinary use. The RLTA requires that the deposit be placed in a trust account.

To collect such a deposit, the rental agreement must be in writing, and the landlord must provide the tenant at the commencement of the tenancy a written checklist or statement specifically describing the condition and cleanliness of, or existing damages to, the premises and furnishings, including walls, floors, countertops, carpets, drapes, furniture, and appliances.

Within 21 days after the termination of the rental agreement and vacation of the premises, or after abandonment by the tenant, the landlord must give a full and specific statement of the basis for retaining any of the deposit and pay any refund owed to the tenant. No portion of any deposit may be withheld on account of wear resulting from ordinary use of the premises.

Current Law on Installment Payments

Upon written request from a tenant, and if the total amount of the deposits and nonrefundable fees exceed 25 percent of the first full month’s rent and payment of the last month’s rent, a landlord must permit the tenant to pay any deposits, nonrefundable fees, and last month’s rent in installments, as follows:

• In all cases where premises are rented for a specified time, three months or longer, the tenant may elect to pay in three consecutive and equal monthly installments, at the inception of the tenancy.
• In all other cases, the tenant may elect to pay in two consecutive and equal monthly installments, at the beginning of the tenancy.

New Law on Security Deposits and Damages

• Authorizes landlords to offer tenants the option of paying an entirely or partially nonrefundable fee in lieu of a security deposit.
• Requires that any entirely or partially nonrefundable fee in lieu of a security deposit collected by the landlord be used to purchase insurance coverage for the landlord’s losses associated with unpaid rent or unit damage.

Here are the changes more specifically:

A landlord may offer the tenant the option of paying a fee in lieu of a full security deposit.

Any tenant that agrees to pay a fee in lieu of a security deposit may opt out of the continuing fee and instead pay a security deposit that is otherwise in effect for the tenant’s unit at the time the tenant chooses to opt out of the fee. When a landlord offers the tenant the choice of paying a fee in lieu of the security deposit, the landlord must disclose to the tenant in writing:

• the terms of any insurance coverage purchased by the landlord for the landlord’s losses associated with any unpaid rent and unit damage paid for by the fees in lieu of the security deposit, including any coverage cap amounts and excluded coverage costs; and
• if the insurance provider requires the landlord to first attempt reimbursement from the tenant before filing a claim, that the payment of the fee does not preclude the insurer or the landlord from filing an action against the tenant to recover for damage to the property for which the tenant is responsible.

Any fee in lieu of a security deposit:

• May be entirely or partially nonrefundable as long as such terms are disclosed in the lease and acknowledged by the tenant;
• Does not constitute rent and failure to pay may not constitute a cause for eviction, provided that nothing precludes the landlord from proceeding in a civil action against a tenant to recover unpaid fees;
• Must be used by the landlord to purchase insurance coverage for the landlord’s losses associated with unpaid rent or unit damage, provided the landlord does not charge the tenant a fee that is more than the reasonable cost of obtaining and administering such coverage;
• May be a recurring monthly fee or payable upon any schedule and in any amount the landlord and tenant choose, provided the first month’s fee is a nonrefundable fee as contemplated under RLTA provisions addressing installment payments; and
• Must not be considered by a court, arbitrator, mediator, or any other dispute resolution adjudicator to be a security deposit or governed by state or local codes governing security deposits.

In the event the landlord fails to purchase or maintain the insurance, and if the tenant pays the monthly fee as agreed, the landlord must credit the total insurance coverage stated in the disclosure to any indebtedness owed by the tenant when the tenant vacates the unit. If the landlord decides to discontinue providing the option of paying a fee in lieu of a security deposit, the landlord must:

• Provide 60 days’ notice to the tenant prior to end of term or period;
• Reduce the deposit by the amount of a tenant’s previous fee payments in lieu of the deposit; and
• Offer the tenant an installment plan to pay any remaining balance for the security deposit over three months.

There are many other provisions to the new law that impact collections, damage claims, security deposits, and loss of coverage. It is important to consult with an experienced Landlord-Tenant attorney about your specific property and tenants before undertaking provisions of the new law. Althauser Rayan Abbarno Attorneys can help!

Experienced Landlord-Tenant Attorneys in Centralia and Olympia

For a consultation with our attorneys in Centralia or Olympia, call (360) 736-1301 or visit CentraliaLaw.com