The 45-Day Letter Rule
If you are a landlord or property manager in Indiana, read on.
Indiana has a law that governs how and when a landlord must return a tenant’s security deposit. The law is officially called the Security Deposit Statute, but I have called it the “45-Day Letter Rule” for nearly 20 years. Here’s why I prefer my name for this law.
A landlord must, within 45 days after getting possession of the rental unit from the tenant for any reason, return any portion of the security deposit owed to the tenant and an itemized written list of damages that reduced the amount of the deposit returned to the tenant.
That’s it. That’s the law. At least, that’s my summary of the law in one sentence. It is a darn simple law, as far as laws go. Yet, it is often ignored, forgotten, misunderstood and misapplied. So, in an effort to correct these mistakes, let me give some additional guidance on this important law.
The Consequences of Being Wrong
Let’s start with understanding why landlords need to understand this law. If a landlord fails to honor this law, the landlord must return all the tenant’s deposit, withholding nothing for damages caused by the tenant, and the landlord is barred from suing the tenant for anything owed under the lease, except unpaid rent. Until a few years ago, the courts applied the 45-Day Letter Rule to unpaid rent in the same fashion as the courts considered the law’s application to damages to the rental unit. More recently, the appellate courts have given landlords some relief by treating unpaid rent as separate from the application of the 45-Day Letter Rule. So, in other words, a landlord who fails to send a 45-Day Letter can still collect unpaid rent but waives all other damages claims against the tenant. Finally, the tenant can sue the landlord and collect attorneys’ fees, interest and costs, if the landlord violates the 45-Day Letter Rule.
45 Days Means 45 Days
Landlords often try to play games with their requirements under this law by claiming that they have no address to which they can mail the 45-Day Letter to the tenant. Give me a break!
It is true that the 45-Day Letter Rule requires the tenant to provide to the landlord the tenant’s forwarding address. However, tenants are not often truthful in a courtroom. Tenants will falsely testify that the landlord was given the forwarding address. The safest course of action for a landlord then is to mail the 45-Day Letter to some address, just to show the court that the landlord was making a good faith effort to comply with the law. If the landlord has no address, then the landlord should send the letter to the address of the rental unit in dispute with a postal request for a forwarding address. Simply write “FORWARDING ADDRESS REQUESTED” on the envelope, which will be returned to the landlord with a new address or no address. That envelope is evidence, so landlords should keep it. If a new address is received, a new 45-Day Letter should be mailed to that new address.
Re-possession for ANY Reason.
The 45 days start when the landlord gets possession back. That is the earliest date that the landlord could have re-possessed the property. Obviously, that implies that the landlord has knowledge that the tenant has left. If the tenant abandons the property without informing the landlord, then there is a question as to when the landlord reasonably should have known that the landlord could re-possess the property. Other cases are much simpler to determine the date of repossession:
- A court orders re-possession on a date certain.
- The building is destroyed by fire, storm, etc.
- The lease expires.
- The tenant abandons the property with the landlord’s knowledge.
- The tenant dies.
Again, landlords who attempt to play games with the requirements of this law will often find themselves wishing they had not. 45 days means 45 days, and it is precarious to attempt extend or avoid the 45-day deadline.
Got the Right Form?
There have been appellate decisions in which the courts have criticized the form of the 45-day letter sent by the landlord. The most frequent violation is the landlord fabricating claims artificially to raise the amount of damages claimed, in an effort to keep all of the tenant’s deposit. If the landlord has not suffered actually damages equal to the security deposit, then some of the deposit must be returned. The application of this law is a Zero-Sum Game for landlords. If a landlord violates the law, the landlord loses big. It’s that simple. So, if you don’t have a good 45-Day Letter form or have a process to abide by this law, then call your real estate lawyer today to get a system in place and the right forms in that system.
As always, Good luck and Happy Real Estate Investing.
Matthew A. Griffith, J.D. is a real estate and business attorney with the GRIFFITH LAW GROUP LLC, a frequent writer and speaker on real estate matters and an investor himself. You can contact Matt at Matt@IndyBizLaw.com or 317-663-0650. Or, follow him at www.AskMattOnline.com or www.IndyBizLaw.com. Learn more about responsible real estate investing at www.MyREIAdvisor.com, where Mr. Griffith is a frequent contributor and guest tele-class instructor.
This article is an overview of the topic, is merely educational, and is not to be considered legal advice. Each reader’s particular circumstances will differ. Readers should seek their own legal counsel and should not rely on this article to conduct their affairs.