How to Properly Handle Tenants’ Security Deposits

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How to Properly Handle Tenants’ Security Deposits

Being a landlord, you may wear a number of different “hats,” such as leasing agent, maintenance person, and the collector of funds. In addition to just receiving rent payments, though, it is likely How to Properly Handle Tenants' Security Depositsthat you have also received a security deposit from the tenant (or tenants) in each of the properties that you own.

For many years, landlords have been collecting security – or damage – deposits from the tenants that rent their properties. Once you receive these funds, it is important to be sure that you follow the proper process.

What Happens Once You Receive the Security Deposit Funds?

Technically, the funds from a tenant’s security deposit do not belong to the landlord. In fact, this money still belongs to the tenant, even though you are “storing” it for them in order to ensure that the property ends up in the same condition that it was in prior to the tenant’s move-in date. Therefore, it is essential to keep these funds safe and secure, as well as liquid.

Because these funds are not yours, you should not “co-mingle” them with your own money. In fact, the state of Florida specifically prohibits landlords from comingling funds with tenants. Instead, a security deposit should be kept in its own separate account. And, if you own more than one property, it is suggested that you actually set up a different bank account for each one.

In addition to being legal protocol, keeping funds separate from yours – and from other properties – can provide you with some additional advantages, such as:

  • Tracking – If a security deposit is mixed in with other funds, it can become much more difficult to track – as well as to validate in a court of law, should there be any issues.
  • Spending – Because a security deposit may represent a substantial sum of money, it can also be easier to spend these funds on repairs for the property, the mortgage payment, or just about anything else. This, too, must be avoided.

How to Keep Track of Deposits and Reduce the Time Consuming Task of Tracking

If you own one or more properties in the Orlando or Central Florida area, we can assist you with keeping track of all of your properties’ needs. As a well established property management company, we will not only work with tenants on the collection or rent and security deposits, but will also deal with the corresponding maintenance and other issues.

For more information on why it makes good sense to work with a property manager, give us a call.

2016-11-16T14:34:53+00:00 By |Advice, Bookkeeping, Tenant Relations|

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