6-18 Refunding and Use — HUD Handbook 4350.3 REV-1

A. In order to receive a refund of the security deposit, a tenant must provide the owner with a forwarding address or arrange to pick up the refund. [24 CFR 880.608(c), 881.601, 883.701, 891.435(b)(2), 891.635, and 891.775]

NOTE: The regulations do not require the tenant to provide this type of notification to the owners in RHS 515 properties with Section 8 and properties with Section 8 LMSA and Section 8 PDSA. However, state law typically requires owners to attempt to refund a tenant’s security deposit.

B. Subject to state and local laws, an owner may use the tenant’s security deposit as reimbursement for any unpaid rent or other amounts the tenant owes under the lease.
C. Within 30 days after the move-out date (or shorter time if required by state and/or local laws), the owner must either:
1. Refund the full security deposit plus accrued interest to a tenant that does not owe any amounts under the lease; or
2. Provide the tenant with an itemized list of any unpaid rent, damages to the unit, and an estimated cost for repair, along with a statement of the tenant’s rights under state and local laws.

HUD Occupancy Handbook Chapter 6: Lease Requirements and Leasing Activities

6/07

6-36

Section 3: Charges in Addition to Rent

4350.3 REV-1

a. If the amount the owner claims is less than the security deposit plus accrued interest, the owner must refund the unused balance to the tenant.
b. If the owner fails to provide the list to the tenant, the tenant is entitled to a full refund of the tenant’s security deposit plus accrued interest.

NOTE: State laws may also have requirements regarding itemizing damages. When a specific federal housing program does not require an itemized list (as is the case for properties with Section 8 LMSA and Section 8 PDSA), owners must be aware of any state or local law that obligates an owner to provide the tenant with an itemized list of damages.

D. If a disagreement arises concerning the reimbursement of the security deposit to the tenant, the tenant has the right to present objections to the owner in an informal meeting. The owner must keep a record of any disagreements and meetings in the tenant file for a period of three years for inspection by the HUD Field Office or Contract Administrator. These procedures do not preclude the tenant from exercising any rights under state and local law.

NOTE: The regulations for RHS 515 properties with Section 8 and properties with Section 8 LMSA and Section 8 PDSA do not require an owner to meet with the tenant or keep a record of the meeting or any disagreements.

E. If the security deposit is insufficient to reimburse the owner for any unpaid rent or other amounts that the tenant owes under the lease, the owner may be able to claim reimbursement from the HUD Field Office or Contract Administrator.
F. Any reimbursement from HUD received by the owner must be applied first toward any unpaid tenant rent due under the lease. Additionally, no reimbursement may be claimed for unpaid rent for the period after termination of the tenancy.