Everybody knows about security deposits, right? You’ve been handling them for so long, you could do them in your sleep. Nothing new to learn. Yikes – Sounds like a situation ripe for a crisis. Although you learned the basics when you started your career, bad habits may have crept into your repertoire.

Security deposits are handled by every property manager. The basics are learned when one starts in the business and then, for the most part, forgotten as habits become learned. Complacency is dangerous, for some of the procedures that become ingrained are simply wrong. Here are a few “bad notions” to be corrected.

“We Don’t Send a Claim if the Resident Was Evicted.”

An eviction does not mean the resident automatically forfeits her security deposit. Even though a resident was evicted, she is entitled to receive the claim you are making against her deposit.

Every time a resident vacates, a claim on the security deposit should be sent. This is true whether the resident vacates under a writ of possession or surrenders keys four months before the lease expires.

It is common that a resident who was evicted “used up” all of the security deposit. Typically, the resident owes more than the amount of the security deposit. Nonetheless, a claim must be made on the deposit.

“We use the deposit for repairs during the tenancy if the tenant caused damages.”

The deposit can only be disbursed or used after the tenant has vacated and the claims process has been followed. Never can the manager use part of the deposit to do repairs during the tenancy. Never can the manager start cutting checks from the deposit before the claims process has run its course.

The only exception is if both the landlord and the tenant sign an agreement for the deposit to be used in this manner. Even if the parties are willing to sign such an agreement, the landlord needs to consider whether this is a wise move. Certainly, it allows for a “band-aid” fix to an immediate problem, but it also depletes the reserve for other crises that may arise down the line.

“We give the deposit to the owner if he asks to hold it in his own account.”

Florida law requires that all security deposits and advance rent shall be held in a Florida banking institution and that the funds not be commingled with other funds. Let’s break that down.

The account must be in a bank that is chartered to do business in Florida. Most, but not all, banks that are physically located within the state fit into this category. [Not sure about your bank? Ask them if they are chartered in Florida. They easily know the answer.] If an out-of-state owner wants to hold the deposit in his own account, it needs to meet this criteria. It is not sufficient for the owner to place the deposit in a national bank located in his home state which has branches in Florida.

The deposit and advance rent must be kept separate from other funds. Property managers know this means the deposit cannot be placed in the operating account. Owners are less likely to understand the issue. If an owner is holding a deposit, it must be in an account that is set up for the purpose of holding the deposit. It cannot be mixed in with the owner’s other funds in a checking or saving account.

We send a Statement of Account and do not use any special form.

By law, you must send the Notice of Intention to Impose Claim on the deposit which is similar to what Florida Statutes priovides.

This wording is crucial and must be on the form: This is a notice of the Landlord's intention to impose a claim for damages upon your security deposit.  It is sent to you as required by section 83.49(3), Florida Statutes.  You are hereby notified that you must object in writing to this deduction from your security deposit within fifteen (15) days from the time you receive this notice or the Landlord will be authorized to deduct its claim from your security deposit.  Your objection must be sent to the Landlord at the address shown below.

We do not disburse the deposit until both landlord and tenant agree about how it is to be used.”

This would be nice to do, but it is not always practical, and it is not required by the law. Rather, Florida law requires a property manager to follow the claims process as well as honor the obligations to the property owner who is her client.

Florida law requires that a landlord return the security deposit within 15 days after the tenant vacates the premises OR that the landlord make a claim against the deposit by sending the written claim by certified mail within 30 days after the tenant vacates the premises. Once a claim is made, a tenant has 15 days to write his objection.

If the property manager receives an objection from the tenant, the property manager must give it consideration. She does not have to accept the objection as the final word on the matter. If the property manager and the owner feel the tenant’s objection is without merit, then the property manager may disburse the deposit according to the directions of the owner (which should be consistent with the claim that was made). Such a discretionary disbursement is proper under the law, provided the owner’s directions are not unlawful. However, the agent’s thankless job of exercising discretion may still carry some risk, even though the deposit would ultimately be allocated between the owner and the tenant in litigation.

“We don’t send a claim if the resident told us to keep the security deposit.” Sometimes a resident will orally tell the manager to keep the deposit. “Use it for what I owe you.” No matter how much you trust the resident’s word, send the claim on the security deposit.

Every time a resident vacates, a claim on the security deposit should be sent. Even if the resident consents to the manager keeping the deposit, the resident is still entitled to receive a claim on the deposit.

Oral directions are only as good as the paper they are written on. They give no protection to the manager.

In addition, if there is more than one resident on the lease, getting the “go ahead” from one resident simply cannot waive the rights of the other residents. Send the claim to all the residents on the lease.

“We Don’t Send a Claim if the Resident Didn’t Give Us a Forwarding Address.”

The statute requires the manager to send a claim on the deposit no later than 30 days after the resident has vacated. The statute also says, in a situation where the resident vacates the premises early, the claim only has to be sent if the resident gave the manager a forwarding address seven days before the resident vacated. Sounds like a great loophole. It’s not. It should never be relied upon.

Every time a resident vacates, a claim on the security deposit should be sent. It should be sent to the last known address, even if that is the unit he just vacated.

The problem with the “loophole” is it contains its own loopholes, making it very difficult for folks (including judges!) to figure out. It is far better to spend the money for the mailing, than to risk being forced to return the security deposit.

 

“Serving the Property Management Professional”

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