Indiana’s 45-Day Letter Rule

There is a law in Indiana that every a landlord or property manager should fully understand in detail.  It is Indiana’s Security Deposit Statute.  We call it the “45-Day Letter Rule.”  Here’s why.

The 45-Day Letter Rule governs how and when a landlord must return a tenant’s security deposit.  In a nutshell, 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 along with an itemized written list of damages that reduced the amount of the deposit returned to the tenant.  It is a simple rule but 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.

If a landlord fails to honor the 45-Day Letter Rule, 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.  In a fairly recent appellate court decision, the law was clarified to give landlords some relief by treating unpaid rent as separate from the application of the 45-Day Letter Rule.  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.  In any case, the tenant can sue the landlord and collect attorneys’ fees, interest and costs, if the landlord violates the 45-Day Letter Rule by failing to return a security deposit rightfully belonging to the tenant.

There are “real estate guru’s” who teach landlords how to play games with the requirements under the 45-Day Letter Rule in order to keep the tenant’s deposit.  For example, a landlord might claim that the landlord has no address to which they can mail the 45-Day Letter to the tenant.  Or, the landlord will get high estimates for repairs, but use low cost contractors and materials to make actual repairs.

The 45-Day Letter Rule requires the tenant to provide to the landlord the tenant’s forwarding address.  So, many landlords will refuse to forward a 45-Day Letter to a tenant at some known address, under the ruse that the landlord was not given the tenant’s forwarding address in writing.  Similarly, tenants will falsely testify that the landlord was given the forwarding address.
The safest course of action for a landlord is to mail the 45-Day Letter to the best known address for the tenant, 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.

The 45 days start when the landlord gets possession of the rental back from the tenant for any reason.  That date is the earliest day 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.
•    Etc.

We urge landlords to avoid playing games with the requirements of this law.  45 days means 45 days, and it is precarious to attempt extend or avoid the 45-day deadline.

Landlords have lost cases, because the courts did not accept and 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 everything but unpaid rent.  So, if you are a landlord or property manager, we urge you to use a good 45-Day Letter form that the courts have approved, and develop a process to abide by this law.  You should also consider calling your real estate lawyer to get a system in place and the right forms in that system.