How do you handle the security deposits from tenants?
Unlike the usual practice in traditional and plain leasing services from other brokers and agents, we keep the security deposit from our tenants in a trust account we maintain. We don’t hand it over to the property owner.
Our purpose in doing it this way is for the protection of both the property owner and the tenant. As the intermediary firm, we have responsibilities both to the tenant and to the property owner.
Since we sign the lease contract with the tenant, we are the ones who are directly in contact with them and consequently, the ones they would directly hold accountable for their security deposit upon the end of the lease term.
If we turn the security deposit over to the owner and for some reason, whether justifiable or not, the owner is unable to return the money at the proper time, we will be the one to answer for it to the tenant.
On the other hand, our responsibility to the owner as per our service contract, includes keeping the property in good, tenantable condition. This places on us the burden of being careful in choosing our tenants. And to help secure that purpose, we collect a security deposit from the tenant. As soon as the need arises for us to charge against the security deposit, we can conveniently do so if we have direct access to the deposit.
This works in favor of the owner to cover the financial risk with having a tenant. We keep the security deposit only for the same purpose the owner would keep it if there was no intermediary party like us in the transaction.
Moreover, if we have to terminate our management of the property and we still hold a security deposit from an existing lease, we will promptly turn over the deposit to the owner, or his authorized representative. The tenant will just be advised accordingly, so that they will not ask us anymore for its return when the time comes.