Can landlords charge non-refundable security deposits?

Security Deposits in Hawaii: Understanding Non-Refundable Charges

When renting a property in Hawaii, tenants often face questions regarding the nature and legality of security deposits, specifically whether landlords can charge non-refundable security deposits. This issue is important because security deposits impact the tenant's initial costs and the potential return of funds after tenancy.

Overview of Security Deposits in Hawaii

In Hawaii, landlords commonly require security deposits as a form of financial protection against damages, unpaid rent, or breach of the rental agreement. The state has clear guidelines governing the collection, use, and return of these deposits, outlined in the Hawaii Revised Statutes (HRS), particularly Chapter 521, which addresses landlord-tenant relationships.

Can Landlords Charge Non-Refundable Security Deposits?

Short Answer: No. Under Hawaii law, security deposits are intended to be refundable and cannot lawfully be designated as non-refundable.

Explanation:

• Definition and Purpose: Security deposits are sums of money paid at the outset of a lease or rental agreement that landlords hold as security for the tenant’s performance under the lease terms, such as paying rent and preventing property damage. They are not meant to be an additional or extra fee, but rather a refundable guarantee.
• Refundable Nature: Hawaii law obligates landlords to return the security deposit to the tenant at the end of the tenancy, minus any lawful deductions for unpaid rent, damages beyond normal wear and tear, or other breaches of the rental agreement.
• Non-Refundable Clauses Are Prohibited: Clauses that label the security deposit or portions of it as “non-refundable” do not align with Hawaii rental laws. Such clauses may be considered unlawful and unenforceable. A landlord cannot simply keep the deposit without cause.

What Are Acceptable Non-Refundable Fees?

While security deposits must be refundable, Hawaii landlords can charge other types of upfront fees that are non-refundable, provided they are clearly disclosed and reasonably related to legitimate expenses.

Examples include:

• Application Fees: Fees charged to cover the cost of screening a tenant’s rental application (e.g., credit check fees). These are typically non-refundable but must be reasonable.
• Cleaning Fees: Sometimes landlords collect a move-in non-refundable cleaning fee separate from the security deposit to cover routine cleaning costs after a tenant moves out.

However, these fees are distinct from security deposits and must be separately itemized and disclosed in the rental agreement.

Legal Requirements for Security Deposits in Hawaii

To comply with state law and ensure transparency:

• Maximum Amount: Hawaii law does not specify a maximum amount for security deposits, but commonly, landlords request an amount equal to one or two months’ rent.
• Written Agreement: The amount, terms, and conditions regarding the security deposit must be detailed in the rental agreement.
• Separate Holding: The landlord must keep security deposits in a separate account and cannot commingle these funds with personal or business accounts.
• Return Timeline: After the tenancy ends, landlords have 14 days to either return the security deposit or provide an itemized list of deductions and remaining funds.
• Interest on Deposit: For tenancies longer than one year, landlords in Hawaii are typically required to pay interest on the security deposit held, as provided under local ordinances.

Tenant Protections and Best Practices

Tenants should be aware of their rights concerning security deposits in Hawaii:

• Review the Lease: Carefully read the rental agreement and ensure that any security deposit is labeled as refundable. Watch for any language suggesting a non-refundable deposit, which is likely unenforceable.
• Document Property Condition: Take photos or videos of the rental property at move-in and move-out to support claims for full security deposit return.
• Request an Itemized Statement: If deductions are made, tenants have the right to ask for a detailed explanation of charges.
• Dispute Resolution: If a landlord wrongfully withholds a security deposit or labels a deposit as non-refundable, tenants may seek legal advice or pursue claims in small claims court.

Conclusion

In Hawaii, landlords cannot lawfully charge non-refundable security deposits. Security deposits must be refundable and serve as financial protection for landlords against damages or unpaid rent. However, landlords can charge non-refundable fees for other expenses, such as application or cleaning fees, provided they are separately disclosed and reasonable. Tenants should carefully review rental agreements for clarity on security deposit terms and understand their rights to ensure proper handling and return of these funds under Hawaiian law.