Security deposit and escrow
If you are a new landlord in Tampa, Florida, you might be wondering what to do with the security deposit or advance rent that a tenant gives you when the lease is signed and move-in date established. This money is required to go into escrow. Escrow is a term that defines what happens when anything of value is held by one party for another party until a specific transaction is complete. You and the tenant are the parties, and the security deposit is the thing of value that you are holding for your renter until he or she moves out of your property..
The Florida Landlord and Tenant laws require you to pay attention to these four important rules when it comes to managing the escrow you hold for your tenants:
- Open a separate account. Your tenant’s funds cannot live with your own personal funds. They are not allowed to share a bank account or borrow from each other. Make sure you set up a separate account for the escrow funds you collect from your tenant.
- Keep the account in Florida. You might have property that you are renting out in Tampa, but you live in California. If this is the case, you may assume that it’s okay to keep the escrow account in your local Bank of America or Wells Fargo branch out in California since those banks do business in Florida as well. However, that is not the case. You need to open an account in Florida, so that those escrow funds are in a bank that is regulated by the state of Florida. You need to avoid federal credit unions as well. Only a bank chartered in Florida will work when you are a Tampa landlord.
- Choose a non-interest bearing account. If you put the escrow money in an account that earns interest over time, you are responsible for sharing that interest with your tenant. The law requires you to pay your tenant 75 percent of the total interest earned, or five percent of the deposit that was paid, whichever is more. Managing the amount of interest you owe your tenant can require extra paperwork, and with the economy behaving as it currently is, the smart financial option is to stick with a non-interest bearing account to hold the escrow.
- Keep your tenant informed. Finally, you need to let your tenant know how you are holding the funds, and where you are keeping them. The easiest way for most landlords to do this is by including language in the lease. Simply put a section on escrow in there, and if your tenant has any questions you can explain what the law requires, and how you are holding the deposit money in compliance with that law.
Your responsibility as a landlord is to keep the escrow amount separate from your own money, open an account in Florida to hold the money, pay interest if necessary and inform the tenant of how the money is being managed. If you can successfully do these four things, you will find yourself complying with all Florida laws related to escrow in Tampa.
Contact us or give us a call if we can answer any questions at (813) 875-7474.