What Is a Security Deposit?

A security deposit is an upfront deposit that most landlords require tenants to pay before they move into a rental unit. The law defines it as “the total of all payments and deposits given by a tenant to the landlord as security for the performance of the tenant’s obligations, and includes all rent payments in excess of 1 month’s prepaid rent.” ATCP 134.02(11). 

Landlords hold security deposits as a guarantee that tenants will pay their bills and keep their rental unit in good condition. When a tenant moves out, a landlord may deduct from the security deposit unpaid rent, bills, costs of repairs, or other fees. The law requires landlords to follow certain timelines for making these deductions and limits the types of deductions that can be charged against a security deposit. 

Do Security Deposits Include Fees and Prepaid Rent?

A security deposit is the “total of all payments and deposits” given as security and “includes all rent payments in excess of 1 month’s prepaid rent.” This includes pet deposits, key deposits, furniture deposits, and prepaid rent (e.g. the last month’s rent). ATCP 134.06. None of these fees can be automatically non-refundable deposits under Wisconsin law. 

How Much Can a Landlord Charge for a Security Deposit?

Wisconsin law does not place a limit on the amount a landlord can charge to a tenant for a security deposit, as long as it is not charged in a discriminatory manner. One exception to this general rule is that a security deposit for a mobile or manufactured home lot cannot exceed 2 months’ rent or $750, whichever is less. ATCP 125.04(1)(b). 

Is an Earnest Money Deposit and Security Deposit the Same Thing?

No. An earnest money deposit is an amount paid by a tenant for the option to enter into a rental agreement in the future. It is usually paid with the rental application. If the landlord approves the application and the tenant enters into the rental agreement, the landlord must refund the earnest money deposit, or apply it to rent or the security deposit. ATCP 134.02(3). 

Is a Receipt Required for a Security Deposit?

Yes. Under ATCP 134.03(2), the landlord must provide a written receipt immediately after receiving a security deposit. The receipt must include the amount and the purpose (e.g. to cover the security deposit). The only time a receipt is not required is when the tenant pays with a check, a note is included on the check that it is for a security deposit, and the tenant does not ask for a receipt. 

Is the Check-In Sheet Important?  

Yes. Under ATCP 134.06(1), before the landlord can accept the security deposit (or apply earnest money to a security deposit), the landlord must notify the tenant in writing that they have 7 days after moving in to do either or both of the following: 

• Inspect the unit and notify the landlord of any existing damages.
• Request from the landlord a list of defects or damages that the landlord charged against the previous tenant’s security deposit.

The landlord generally will give a tenant a check-in sheet to use for the inspection. But a tenant can make their own or use the Tenant Resource Center’s sample. Problems such as the following should be included in the check-in sheet: 

• Stained carpets or damaged floors
• Cracked windows
• Torn or missing screens
• Nail holes, cracked paint, peeling wallpaper
• Dirty conditions, fixtures, and appliances
• Stained walls and ceilings
• Plumbing, sinks, bathtubs, and tiles that are worn, dirty, mildewed, or not working properly
• Missing light bulbs or glass light covers
• Electrical outlets or other items that do not work (light switches, stove burners, oven coils, etc.)
• Countertops that are stained, scratched, or damaged

Tenants should consider taking pictures or videos of the unit, with a date stamp, when they move in to show any damages or defects documented on the check-in sheet. A tenant cannot be charged for pre-existing damages in the unit. Tenants should keep a copy of the completed check-in form.

If a tenant requests from the landlord the deductions from the previous tenant’s security deposit, the landlord must provide a list of those deductions within 30 days or 7 days after notifying the previous tenant of the deductions, whichever is later. ATCP 134.06(1)(b). The landlord is not required to give the current tenant identifying information about the previous tenant or the amounts withheld. 

Should Tenants Complete a Check-Out Sheet Too?  

Yes. Tenants should try to schedule a check-out appointment with the landlord when they move out. If the landlord agrees to do this, tenants should leave with a signed copy of a check-out sheet. If a landlord does not have their own form, tenants can use TRC’s sample check-out form. If the landlord notes things that are dirty or damaged, the tenant can offer to clean or fix them before moving out to try to avoid getting charged for it.

If the landlord does not go through the apartment with the tenant, tenants should complete their own check-out form and take pictures documenting the condition of the apartment, including places the tenant cleaned or fixed. It is also important to date the pictures.

It is very important that tenants leave their forwarding or new address with the landlord. If the tenant completes a check-out form, the new address can be included on that form. Landlords are required to deliver or mail the security deposit to the tenant’s “last known address.” If a tenant does not provide a new address, their last known address is the home they just moved out of. 

The tenant should keep a copy of the check-out form. 

What Can a Landlord Deduct from a Security Deposit?

The standard charges that can be deducted from a security deposit are listed in ATCP 134.06(3)(a) and Wis. Stat. 704.28(1):

• Tenant damage, waste, or neglect of the premises
  • This does not include normal wear and tear, or damages that are not reasonably the responsibility of the tenant 
• Unpaid rent 
  • However, the landlord is required to mitigate their damages by taking reasonable steps to rerent the unit. Wis. Stat. 704.29. For example: A tenant paying $1000/month moves out 3 months before their lease term ends. The landlord pays $100 to advertise for the unit and rerents it 1 month later. The landlord can deduct from the security deposit $1,100 ($100 for the advertising costs plus $1000 lost rent) plus any other lawful charges. The landlord cannot charge the previous tenant the other 2 months of rent. 
• Unpaid utilities owed under the rental agreement that are paid by the landlord if not covered by the tenant but not included in the rent
• Unpaid utilities provided by a government-owned utility if the landlord is responsible for the charges when the tenant does not pay
• Unpaid municipal permit fees assessed against the tenant by a local unit of government if the landlord is responsible for the charges when the tenant does not pay
• Any other payment listed in a lawful nonstandard rental provision
  • Landlords can deduct for other charges only if:
    • the provisions are included on a separate document from the lease but included with the lease,
    • the document is labeled NONSTANDARD RENTAL PROVISIONS, and 
    • the landlord reviewed each nonstandard rental provision with the tenant (this can be shown by the tenant’s initials or signature on the document)
  • A nonstandard rental provision may include a provision that unpaid late fees may be deducted from a security deposit

What Cannot be Deducted from a Security Deposit? 

It is illegal for a landlord to deduct from a security deposit the costs associated with “normal wear and tear” of the unit or for other costs that the tenant is not responsible for under the law. This is illegal even if the tenant signed a Nonstandard Rental Provision authorizing these deductions. Normal wear and tear includes routine carpet cleaning. ATCP 134.06(3)(c); Wis. Stat. 704.28(3). 

When Must a Landlord Return the Security Deposit?

Landlords must deliver to the tenant’s last known address the full security deposit and/or an itemized list of deductions from the security deposit. Under ATCP 134.06(2), the landlord must comply with this requirement within 21 days after any of the following: 

• If the tenant leaves at the end of the lease, the date the lease ends
• If the tenant moves out or is evicted before the end of the lease, the date on which the tenant’s rental agreement terminates or, if the landlord rerents the premises before the tenant’s rental agreement terminates, the date on which the new tenant’s tenancy begins
• If the tenant moves out or is evicted after the lease has ended, the date the landlord knows the tenant left the unit

The landlord can deliver the security deposit and/or the list of deductions personally, by email, or by mail. ATCP 134.06(4); Wis. Stat. 704.10. 

Does the Law Require A Security Deposit to Accrue Interest?

No. 

One exception is a security deposit of more than half the monthly rent that was paid before 2011 for a unit in Madison. Under Madison General Ordinance 32.07, a tenant may be owed interest accrued on their security deposit before 2011 unless the interest had already been applied as a rent credit. The applicable interest rates are maintained by the Wisconsin Department of Financial Institutions. Tenants in that scenario may want to contact an attorney to discuss their options. 

Can a Tenant Cash a Check Covering a Partial Security Deposit Refund?

Cashing a check that the tenant believes does not cover the full amount owed is risky because the tenant may not be able to sue for the remaining amount. Tenants in this situation may want to contact an attorney for legal advice about their options.  

What Are a Tenant’s Remedies if Their Landlord Doesn’t Follow These Rules?

If a landlord does not return the security deposit and/or the list of deductions within the required 21 days, or if the landlord deducted costs from a security deposit that should not have been deducted, a tenant can consider 3 main options.  

1. The first option is to write an email or letter to the landlord specifying the issue(s) that needs to be addressed. A tenant should include specific reasons why they disagree with a deduction and provide information about why that cost should not have been deducted from the security deposit. A tenant should also confirm the landlord has their new address. 
2. The second option is to file a complaint with the Wisconsin Department of Agriculture, Trade, and Consumer Protection (DATCP). The complaint can be filed online or over the phone at (608) 224-4953 or (800) 422-7128. 
3. The third option is to sue the landlord in small claims court. If a court finds that the landlord violated the laws on security deposits, the tenant may be awarded twice the amount of their damages plus costs and reasonable attorneys’ fees. Wis. Stat. 100.20(5); ATCP 134.