Is it necessary to have a separate account for security deposits?

Question

I established a llc and opened a checking account in the llc. My accountant ask if I had another account for security deposits. Is this a requirement.

Scott M. · Answer

Legally speaking this varies by state.  What sate is your property in?  No matter what state you are in it is a solid idea.  You may also want to google/bing landlord/tennat laws in X state or at the very least SD laws in X state.  Might be other valuable pieces of info waiting for you : )

Jennifer Ruelens · Answer

In Pennsylvania, if you are a landlord managing your own properties, you do not have to keep security deposits in a separate account.  HOWEVER-   at the start of the third year of tenancy the deposit must be held in an interest-bearing account and the interest dispersed to the tenant each year at the anniversary of their tenancy.  The landlord may retain the first 1% of interest earned for administrative costs.  So if the account earns 1.5% interest, you would send the .5% interest to the tenant each year.  Or what the rest of us do is put it in an account earning less than 1% interest and don't worry about sending the tenant any interest.  Best practice is to not comingle security deposits with your other monies.  They are a tenant liability and deserve to be treated as such.

Nathan Gesner · Answer

I highly recommend "Every Landlord's Legal Guide" by NOLO. Tons of practical advice, written by attorneys, and points you directly to the state statutes. They also have a good website, but you should really buy the book.

https://www.nolo.com/legal-enc...

Adam Martin · Answer

As others have said it depends on the state.  I am in KY and we have to disclose the Bank and account number as well as keep it in a separate account not comingled with personal finances.  We are however allowed to have 1 account with multiple deposits and I just have this information as a part of my lease.  Failure to do so results in us not being able to deduct from the security deposit.  Even if this weren't the case however I would still keep them separate just for an easy paper trail and to avoid any appearance of wrongdoing.

Eric James · Answer

It would be a very good idea to learn all your state rental laws. Not just this one.

Dexter Cox · Answer

@Jennifer Ruelens thank you

Alecia Loveless · Answer

@Dexter Cox In NH we with have to keep each tenants security deposit in an individual interest bearing account or apply it towards last month rent.

Dexter Cox · Answer

@Scott M.

I’m In Pennsylvania

Is it necessary to have a separate account for security deposits?

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