HUD Handbook 4350.3 § 6-18

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.

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.