When you rent out a property, you have the right to ask for a security deposit. The point of it is to protect you should the tenant move out and leave behind damage you need to fix. There are specific rules about returning security deposits that you must follow or you could face penalties. 

According to the Connecticut General Assembly, a security deposit never belongs to you and remains the property of the tenant until the rental agreement ends at which point you usually must return it. You must hold the deposit in an escrow account separate from other money since it does not belong to you. Not having the money to return at the end of the lease is not viable reasoning for not returning it since you should never spend this money or treat it as income. 

Exception

The main exception to returning the deposit is that you may remove money to cover damages the tenant caused by failing to adhere to the rules in the lease contract. You must give the tenant an itemized receipt showing how much you took and why you took it from the deposit. 

Penalties

If you keep the security deposit and do not have a legal reason for doing so, you will face fines and possible penalties from the court. The tenant can file a lawsuit against you. The court can make you pay a fine of up to $250. You may also be liable for court costs and other expenses related to the case if the judge finds you withheld the deposit without reason.