Web Admin – Thursday, September 05, 2013
Since we get calls from owners who have had trouble with handling their security deposits, we thought we would talk a bit about them today. Security deposits in Utah can be held by an owner or a management company. It is important to understand the laws governing how security deposits are handled, especially if you are going to be the one holding that money. Most property management companies are familiar with the laws and they know how to properly hold onto the deposit and handle giving it back at the end of a tenancy. Each state is different and has different laws, so if you are handling the deposit on your own and you as the property owner are going to keep it, make sure you understand what is required of you according to your state law. You will need to understand the timing and the disposition of the deposit. Owners often get into trouble when they are holding the security deposit but they are unfamiliar with the laws.
We recommend that you have a property management company hold the deposit. This will relieve you of any responsibility when it comes to managing the money, and you will know that you are safe from inadvertently violating your state law. Most management companies have a trust account set up that is completely separate from the business account. In Utah, this practice is pretty standard, and I think a lot of states require that the security deposit remain in a separate account.
Security Deposit Handling Best Practices Salt Lake CityThere is also the matter of interest. In California, I know that it’s a new requirement that interest on the security deposit be paid to the tenant. Lots of owners call us to find out if Utah has a similar law. We do not. In Utah, there is a nonprofit charitable organization that helps to find housing for people who live below the poverty level. Any interest accrued on security deposit is given directly to that organization through most property management companies in Utah. Check with your state on whether interest is required to be paid to your tenants.
Security deposit accountability is also important. You need to remember this is the tenant’s money, and if you are going to withhold any of it at the time of move out, you need to be able to explain exactly why you are doing that.
If you have any questions on how to handle security deposits, please contact us at Sentinel Management Group, and we’d be happy to help you out.