New Property with Owner Held Security Deposits

Taking On a New Property with Existing Tenants

A Property Manager acquired property that has a tenant in place, but the Security Deposit had previously been paid to owner.

‍

Later in time, the tenant decides to move out. The owner is notified but office staff mistakenly only ask the owner to contribute a smaller portion of the original Security Deposit. The smaller portion requested was calculated by looking at the original Security Deposit less tenant expenses to be charged at the time of move out.

‍

This is not an ideal situation and causes a variety of issues with accounting. In addition to inadequate funds that were requested to cover any expenses on the property and any eligible refund to the tenant, the scenario continues in that the tenant’s security deposit that was originally paid, was not posted to the tenant’s ledger and not on the property trust accounting for the $2,000 tenant liability.

‍

The issues identified here are that the security deposit needs to be recorded on the tenant ledger as a paid Owner Held Security Deposit. This will post $2K to the Owner Held Security Deposit GL that will need to zero out with the security refund to the tenant and an offset for the additional funds.

‍
<blog-cta>Need help with Owner Held Security Deposits? Click here to talk to an expert today.<blog-cta>

‍

Move Out Flow

1. Navigate to the Tenant page > Create a tenant charge for amount of the Owner Held Security Deposit.

2. Create a tenant credit for the amount of the Owner Distribution since it was paid prior to the property being switched to new management.

3. Initiate Tenant Move Out Workflow

• Create charges for any damages under the relevant Income GL Account
• Review Move Out and Post Accounting
• Finish Move Out

4. Click on Payables. There will be a tenant payable for the Security Deposit refund.

5. Request an Owner Contribution for the full Security Deposit amount and post.

‍

Questions?

‍

We can help. Click here to schedule your complimentary consultation with one of our property management software experts.

‍