How to Properly Collect A Landlord Tenant Security Deposit And Pay Security Deposit Interest To The Tenant
Most landlords in Florida collect from their tenants a security deposit and advance rent before the tenant steps even one foot in the rental property. The purpose of the security deposit is to "secure" the landlord against a future breach on the part of the tenant. Unfortunately, in the event of a breach of the lease by the tenant, the "security deposit" is usually the only practical recourse to recover money from the tenant. As a result, landlord tenant disputes often arise over whether a landlord may properly keep the security deposit or advance rent, and if not, how much security deposit interest is due to the tenant. The following steps will help the Florida landlord understand how to properly collect a landlord tenant security deposit and to account for the appropriate amount of security deposit interest.
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Instructions
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First, the landlord must understand the terminology used in landlord tenant disputes. A "security deposit" is defined as money "held by the landlord as security for the performance of the rental agreement, including, but not limited to, monetary damage to the landlord caused by the tenant's breach of the lease prior to the expiration thereof." On the other hand, "advance rent" is payment of rent for a future rental payment. You may have heard the term "first, last, and security deposit." The "last" term, as used in that phrase, is payment for the last month of rent and is "advance rent."
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Second, the landlord must understand the several methods of retaining security deposits. As a threshold matter, the landlord must know that regardless of the landlord's preferred method, if he or she rents five or more units, the landlord must, within 30 days from receipt of the security deposit, notify the tenant in writing as to the manner in which it is held, when interest payments are to be paid, and the name of the financial institution where the money is being held.
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The first method of holding the landlord tenant security deposit is to deposit it into a separate, non-interest bearing account. This account must not be commingled with the landlord's separate funds. The advantage of this account is that the landlord need not pay security deposit interest. The second method is to deposit it in a separate interest bearing account. This account requires that the landlord pay security deposit interest in the amount of 5% simple interest or 75% of the annualized annual interest. Like the non-interest bearing account, the security deposit cannot be commingled with the landlord's separate money. The last method is a commingled account. With this account type, the landlord must pay security deposit interest in the amount of 5% simple interest. Additionally, the landlord must post a security bond in the amount of the deposit or $50,000, whichever is less.
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Third, the landlord must understand when then security deposit must be returned to the tenant. Once the lease is terminated, if the landlord does not intend to make a claim on the security deposit, the landlord must return the security deposit plus any accrued security deposit interest to the tenant. This must be done within fifteen days from the tenant vacating the premises. If, however, the tenant improperly terminated the lease, the landlord is not required to pay security deposit interest to the tenant.
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Tips & Warnings
Advance rent is only available if the lease is in writing. If it is not in writing, it will be deemed "prepaid rent" which may have to be returned to the tenant.
A security deposit is different from advanced rent in that it is considered to remain the tenant's money which will need to be returned to the tenant at the expiration of the lease term unless the landlord properly asserts a claim against it.
