Deposit To Hold Question... Where do I deposit??

Question

Hi BP Family I hope everyone is out there safe and taking care of others the best they can! So I have potential tenants that passed all qualifications and seem to be great people. They want to move in middle of month and put a deposit down to hold. I am aware the Deposit to Hold will "transfer" into a Security Deposit but for the time being where should the money be held until they sign the lease?

James Morin · Answer

@Michael King I have separate accounts for security deposits which by law I need to(not sure if every state is the same) But for Deposits to Hold you have a separate account for those as well?

Michael King · Answer

I have a separate account for deposits.

I may be wrong (wait, often that's the case, ask my wife she will confirm), but if you take a 'holding fee' that becomes their security deposit, you would be able to keep that if they decide they don't want the place after all. I think I read that in Brandon Turners book.

Michael King · Answer

I'm in Missouri and separate accounts are required (from memory). If I was doing it today, I would put the 'fee' or SD into the account with my other SDs. If the fee became an income, then I would transfer it to my income/expense account.

Michael King · Answer

@Sylvia B. Good catch Sylvia! That link came directly from (landlordology) Cozy.co website. The lesson is trust but verify.

Sylvia B. · Answer

Here's the problem:

From my link:

They changed it.

Michael King · Answer

I don't know, it looks like this one says different, and this is where I thought I read it.

https://revisor.mo.gov/main/OneSection.aspx?section=535.300&bid=33548&hl=

James Morin · Answer

Thank you everyone for all your help!!

Sylvia B. · Answer

@Alex Olson@Michael King

LINK TO STATUTEIn MO, security deposits must be kept in a bank or credit union, and any interest earned belongs to the landlord. While we are not required to have a separate account just for security deposits, it is important to remember that the money is being held for the tenant, and a separate account would be prudent.

Please note, I posted this mainly for others who will read this thread, so that they can read the law for themselves.

Bjorn Ahlblad · Answer

Until it becomes a security deposit you can hold it any place you want. When it becomes a security deposit your state or jurisdiction may have rules about that.

For us we do not do 'holding fees' we just charge rent. We had one 'tenant' last year who paid us 1st, last, and a security deposit up front; never moved in (MTM lease) paid on time every month for six months, and decided to give us 30 days notice. No problem. We used the last month's rent we already had, and we deducted a modest cleaning fee from the deposit. She was fine with that.

Michael King · Answer

Thanks Alex, I thought I read that somewhere, I stand corrected thank you! Maybe I confused it with the fact we can put the funds in interest bearing accounts.

Deposit To Hold Question... Where do I deposit??

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