Limited Security Deposits, Installment Plans, and Seattle’s New 2017 Residential Enforcement Provisions

Changes to Seattle Municipal Code 7.24 – Rental Agreement Regulation

City of Seattle Ordinance No. 125222 went into effect on January 16, 2017, and introduced important amendments to the City’s Rental Agreement Regulation Ordinance governing landlord/tenant relationships within the City of Seattle. The full text can be found here.

It is essential for residential landlords within the City of Seattle to understand the impact of these new regulations when entering future rental agreements. The regulations affect all rental agreements and/or renewals executed after January 16, 2017, and some provisions apply retroactively; landlords should take the time necessary to fully review and understand the ordinance. Failure to adhere to the new regulations can create a tenant defense to unlawful detainer action and expose a landlord to a multitude of damages, including damages double the amount of any security deposit unlawfully charged or withheld by the landlord, fines and possibly an award of attorney fees and costs.

The key changes to SMC 7.24 are:

Security Deposit and Move-in Fee Limits SMC 7.24.035 — Imposes limits on security deposits, non-refundable move-in fees, and requires an installment payment program if elected by tenant:

• Security deposit and non-refundable move-in fees cannot exceed the amount of the first full month’s rent.

• Pet deposits are limited to 25% of the amount of first full month’s rent.

• Non-refundable move-in fees are limited to only tenant screening reports, criminal background checks, credit reports, cleaning fees, and may not exceed 10% of the first full month’s rent.

• If a non-refundable move-in fee for cleaning was provided, Landlord may not deduct additional cleaning fees from the tenant’s security deposit.

• If elected by tenant, landlords must allow an installment plan to pay a security deposit, pet deposits, and move-in fees:

  • For rental agreements of 6 months or longer—6 consecutive and equal payments.

  • For agreements between 30 days and 6 months—4 consecutive and equal payments.

  • For month-to-month agreements—2 equal installments; except for pet deposits, which may be paid in 3 equal monthly installments.

Installment Plan for Last Month Rent SMC 7.24.036 – Landlords are now required to provide a payment plan for last month’s rent as well, according to the same time periods found above.

Pet Damage Deposits SMC 7.24.038 – Pet Deposits can be paid in three consecutive monthly payments.

Security Deposit Returns – The requirements for security deposit returns have not been altered. The new ordinance, however, provides that the Seattle Department of Construction and Inspections may investigate and possibly take action where a landlord is improperly withholding a deposit return, or where the new rental agreement regulations are not followed.

Landlords should pay close attention to the security return requirements, including the following:

• The tenant and landlord must have signed a move-in condition checklist.

• Security deposits must be returned within 21 days of the tenant leaving the property.

• The reasons for withholding any portion of a deposit return must be itemized in writing and provided to the former tenant within 21 days of tenant vacating the property.

Distribution of summaries required SMC 7.24.080 – Summary of the new landlord/tenant rules prepared by the Director pursuant to the new rules must be provided to any tenant or prospective tenant when the rental agreement (or renewal) is offered. Failure to do so provides a tenant with a right to terminate the rental agreement pursuant to law and exposes the landlord to actual damages, attorney fees, and a penalty of up to $500.00 (if court finds it was deliberate, $1,000.00). A current copy of summary must also be provided to current tenants within 30 days after it is made available by the Director.

As the changes make clear, many existing rental agreement will require modifications and revisions to ensure they are complying with the ordinance. To limit potential liability, landlords should dust off their lease and review them along with the new changes. If you have any questions or would like more information, please contact an attorney at Holmquist and Gardiner, PLLC.

This article is intended to inform the reader of general legal principles applicable to the subject area, and is not intended to provide legal advice regarding specific problems or circumstances.  Readers should consult with competent counsel with regard to specific situations.