Security Deposits: Escrow or Landlord/Tenant Account

6 Replies

Connecticut law states that the security deposit MUST be held in an escrow account. When I went to the bank today, they advised me to open a Landlord Tenant account which I believe is not an escrow account. Can someone advise me if both are the same? What do you do in your business?

-Dinesh.

Try and find an escrow account, maybe ask your attorney who they use.  You want to be able to withdraw without their written/present consent to do repairs when they move out. 

I bank at Chelsea Groton Bank. I just go in and tell them that I need to set up a security deposit account. They create an account using my information and the tenants information. The only person that has access to the account is me. I just go in and close the account when someone moves out. 

You will setup another bank account called a "Tenant's Security Deposit Trust Fund Escrow Account" at the bank.  You must keep the tenants Security Deposits separate from your own bank account.  (Check your state law)

When you deposit the Security Deposit into the Security Deposit Trust Fund Escrow Account at the bank you will make the Security Deposit in QuickBooks, if you use QuickBooks, a Security Deposit Other Current Liability Account. 

Nancy Neville

Originally posted by @Mat O'Grady :

I bank at Chelsea Groton Bank. I just go in and tell them that I need to set up a security deposit account. They create an account using my information and the tenants information. The only person that has access to the account is me. I just go in and close the account when someone moves out. 

 Thanks Mat. I went to TD bank & they advised me to open a Landlord Tenant account. I guess I am splitting hairs here, this might be enough.

-Dinesh.

@Nancy Neville is spot on.  The issue is an account that is not 'mingling funds' with your personal nor your petty cash to operate the rental.  Also investigate if the interest on the deposit belongs to the tenant.

Just something to add, my bank required me to have their social security numbers and copies of their ID's as well. They are entitled to interest earned, but they would theoretically be responsible to declare it as well. However the last tenant I had leave earned about 20 cents on his deposit 😄