Segregating Security Deposits

5 Replies

I have a rental home. I have a mortgage, operating/checking account, and savings account all with the same bank. I have the tenant's security deposit segregated in the savings account, while rent, mortgage payment, and other bills go through the operating/checking account.

I recently noticed an "inactivity fee" on the savings account. I was told by the bank that there is a federal law which requires banks to ensure that all deposit accounts remain active, and that is why my bank imposes this "inactivity fee".

Is this accurate? And more broadly, how do other landlords ensure that their tenants' deposits are kept segregated without being eaten up by fees?

Thanks!

@Jason Ross - I had this happen with an old savings account. I just started to once a quarter move in a few bucks into the account, then transfer it out the next day. Sort of a pain but it worked.

Currently I have enough activity (high enough unit count, and having at least one tenant cycle out  year, that deposits get withdrawn to show activity) that it isn't an issue anymore.

Jason,

As a licensed Broker in Florida, we can have a certain dollar amount of our money in the account for this very reason. Also in Glourfa we can keep everything in an “escrow” account t, but o would never recommend that. I like to have trust and escrow for cleaner bookks

Look up the landlord tenant laws in your state and this should clear up your dilemma

Originally posted by @Jason Ross :

I have a rental home. I have a mortgage, operating/checking account, and savings account all with the same bank. I have the tenant's security deposit segregated in the savings account, while rent, mortgage payment, and other bills go through the operating/checking account.

I recently noticed an "inactivity fee" on the savings account. I was told by the bank that there is a federal law which requires banks to ensure that all deposit accounts remain active, and that is why my bank imposes this "inactivity fee".

Is this accurate? And more broadly, how do other landlords ensure that their tenants' deposits are kept segregated without being eaten up by fees?

Thanks!

 If THEIR money in the same account as yours? Is it interest bearing? Your state statutes will define how security deposits are held. Google them, print them out for future reference, and make sure you stay in compliance. As to segregation, I keep all my tenants in one account which I label in my books as liabilities. The money belongs to the tenant unless a legal claim is made, etc.

BTW--a small community bank may not nickel and dime you to death.

@John Thedford , no, my funds are not commingled with the tenant’s security deposit, but sadly it is a small community bank that is nickel-and-diming the savings account in which my tenant’s funds are segregated (and telling me they are obligated to do so by federal law).

Thanks, Andrew Kerr for your suggestion. I was hoping to avoid that solution! But I guess no such luck.

Interesting. My bank doesn't charge anything but I do know they have an inactivity fee. Mine don't sit stagnant for a long period of time. I would try another bank.

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