Security Deposit Disposition — End-of-Lease SOP

This SOP governs PPM's internal process for handling security deposit disposition at the end of a tenancy. It covers the full workflow from move-out notice through final refund or deduction, and defines responsibilities across Maintenance, Accounting (CFO Agent), and the Leasing & Turnover department.

Trigger: Tenant move-out notice received or lease termination date reached.

Owner: Leasing & Turnover (pending department build); currently managed by Dan.

Compliance deadline: 30 days from tenancy termination and return of possession (NJ RSA 46:8-21.1).

Policy Summary

PPM does not hold tenant security deposits. Deposits are the owner's responsibility under NJ law. PPM facilitates documentation, damage assessment, and deduction processing on the owner's behalf.

For tenants enrolled in Obligo (deposit-free renting), no deposit is held. At move-out, PPM submits a damage reimbursement request to Obligo with supporting documentation and receives payment via ACH. The standard inspection and documentation process below still applies.

Step-by-Step Process

Step 1 — Confirm Move-Out Details

Confirm move-out date and notice-given date in Buildium (LeaseMoveOutData).
Verify tenant has provided a forwarding address. If not, request immediately — required for deposit return by certified mail under NJ law.
Confirm whether the unit is Obligo or traditional security deposit.
Pull the original Move-In Condition Report from Drive for comparison at inspection.

Step 2 — Schedule Move-Out Inspection

Schedule walk-through for the move-out date or within 24 hours of key return.
Notify the tenant at least 2 weeks in advance and encourage their presence.
Assign the inspection to the appropriate staff or vendor. Confirm the inspector has the move-in report.

Step 3 — Conduct Inspection and Document Findings

Walk through every room. Compare current condition against the move-in report.
Photograph all damage, cleanliness issues, and missing items.
Complete the Move-Out Condition Report. Note each item as: Normal Wear and Tear (no charge) or Damage / Chargeable.
Normal wear and tear (minor scuffs, small nail holes, carpet wear from use) is never charged to the tenant.
Upload photos and completed report to the tenant's folder in Google Drive.
Create a work order in Buildium for any repairs required to turn the unit.

Step 4 — Prepare Damage Assessment and Cost Estimate

For each chargeable item, obtain a cost estimate (vendor invoice, internal rate card, or quote).
Compile the itemized deduction list: item description, justification, and dollar amount.
Also include any outstanding unpaid rent, fees, or charges on the lease ledger in Buildium.
Legal review required before finalizing any deductions. Any disputed or significant damage claim must be reviewed by legal counsel before the itemized statement is issued. The AI Compliance Officer has veto authority on any action introducing regulatory risk.

Step 5 — Owner Notification and Approval

Send the proposed itemized deduction list and supporting documentation to the property owner for review.
Obtain written owner approval for all deductions before proceeding.
If the owner disputes a proposed deduction, resolve before issuing the tenant statement.
Route any non-standard deductions or disputes to Dan for final decision.

Step 6 — Execute in Buildium

Post approved deductions to the lease ledger using the ApplyDeposit transaction type in Buildium.
Post any remaining refund amount using the Refund transaction type.
All Buildium write actions (ApplyDeposit, Refund) require Dan's explicit approval before execution — route via #exec-decisions.
For Obligo units: submit the damage reimbursement request to Obligo with the inspection report and photos. Record the ACH receipt in Buildium once received.

Step 7 — Issue Itemized Statement to Tenant

Prepare the itemized written statement listing all deductions with amounts and reasons.
Send to the tenant's forwarding address within 30 days of tenancy termination and possession return — by certified mail if a forwarding address was provided.
If the full deposit is being refunded with no deductions, send the refund check or ACH within 30 days.
Log the send date and delivery method in Buildium and Google Drive.

Step 8 — Handle Tenant Disputes

If a tenant contests deductions in writing within 15 days of receiving the itemized statement, acknowledge receipt and conduct an internal review.
Escalate all disputes to Dan. Do not negotiate or modify deductions without Dan's approval.
Engage legal counsel for any dispute where the tenant threatens or initiates legal action.
Unresolved disputes may proceed to NJ Special Civil Part (Small Claims Court).

Key Deadlines

30 days — Return deposit or itemized statement from tenancy termination + possession return (NJ RSA 46:8-21.1)
Failure to comply — Tenant may sue for double the deposit amount plus attorney's fees
Forwarding address — If tenant provides no forwarding address, the 30-day clock still runs; document all attempts to locate

NJ Deposit Limits and Holding Requirements

Maximum deposit: 1.5 months' rent
Deposits must be held in a separate interest-bearing account
Tenant must be notified of the bank and account number within 30 days of receipt
Annual interest must be credited to the tenant or applied to rent
PPM does not hold deposits — owner compliance is required; PPM advises and facilitates

Responsibility Matrix

Task	Owner
Move-out confirmation and forwarding address collection	Leasing & Turnover / Admin Agent
Move-out inspection scheduling and execution	Maintenance / Staff
Move-Out Condition Report and photo documentation	Maintenance / Staff
Damage cost estimation	Maintenance / Vendor
Legal review of deductions	Dan + Legal Counsel
Owner approval of deductions	Owner Experience / Dan
Buildium ApplyDeposit / Refund execution	CFO Agent (with Dan approval via #exec-decisions)
Obligo reimbursement request	Leasing & Turnover / Dan
Itemized statement issuance to tenant	Leasing & Turnover / Dan
Dispute handling and escalation	Dan + Legal Counsel