What is a Tenant Lease Security Account?
Due to the regulations in many areas, landlords need need to store their Security Deposits in an account dedicated to storing security deposits and cannot be mixed with the funds used for regular operations. Holding the funds in a separate account is crucial for compliance purposes. These accounts should be FDIC-insured as the monies may need to be returned back to the tenant if there are no repairs necessary beyond regular wear-and-tear.
Are there any requirements?
Depending on your local jurisdiction, property investors may have specific compliance requirements for their security deposit account.
- Provide tenants with interest on their deposits. Some jurisdictions stipulate that if the deposits are stored in an interest bearing account, landlords must return the deposit with interest, less any appropriately charged administrative fee.
- Store deposits in a bank located within the state. Some states, like New York, requires landlords to store the security deposit in a bank based in the state. Nophin partners with Piermont Bank, Member FDIC, which has offices in New York City so your deposits are in New York.
- Return the security deposit in a timely fashion. Some states have requirements around how long a landlord can hold onto the security deposit for. This means repairs and valid deductions for the security deposit must be performed before the date.
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