Property Management Company Takes on New Property with an Existing Tenant
The scenario is that a Property Manager acquired property that has a tenant in place and tenant’s 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.
Navigate to the Tenant page → Create a tenant charge for $$ accounted to Owner Held Security Deposit. This reflects on the General Ledger as
2. Create a tenant credit for $$ accounted to Owner Distribution since it was paid prior to the property being switched to new management. This reflects on the General Ledger as
3. Initiate Tenant Move Out Workflow
4. Click on Payables----> There will be a payable for $600 Security Deposit refund to the tenant.
5. Request Owner Contribution for the balance of funds needed for the full Security Deposit and post.
6. Deposit Security Deposit
Process is complete