Security Deposits

[TerryF]

We have just received security deposit money for a rental and it is currently in our personal savings account while we figure out where we should put it. This will likely be a short term rental (less than 6 months). My question is this...... can the money be left in our personal savings account as long as the balance in the account doesn`t drop below the value of the security deposit we are holding?

Any thoughts from the experienced landlords out there?

Thanks,

Terry

 

[jeremyfleming]

QUOTE (TerryF @ Jan 5 2008, 09:50 AM) We have just received security deposit money for a rental and it is currently in our personal savings account while we figure out where we should put it. This will likely be a short term rental (less than 6 months). My question is this...... can the money be left in our personal savings account as long as the balance in the account doesn`t drop below the value of the security deposit we are holding?

Any thoughts from the experienced landlords out there?

Thanks,

Terry

Terry,
I might suggest that you have a seperate account for your business funds (still in your personal name is fine). Deposits, rents, etc. would then go into this account, while mortgage payments, management etc. come out of it. Some folks will have a seperate account for each property, while others just use one account, and track all the finances in a ledger or excel spreadsheet, Quickbooks or what have you.

When I first started out, I put everything through my personal account, and that is a mistake in my opinion. A second account is cheap, and makes tracking numbers much easier. It is pretty tough to accidently spend someone`s deposit if it is in a rental account.

Hope that helps.

 

[lanedry77]

QUOTE (jeremyfleming @ Jan 5 2008, 10:55 AM) A second account is cheap, and makes tracking numbers much easier. It is pretty tough to accidently spend someone`s deposit if it is in a rental account.
President`s Choice accounts are completely free, and they have a savings account that gives a 4.1% interest rate on balances over $1000. That`s where my security deposits are stored, ensuring that the interest that is paid back to the tenant when they move out comes from the bank, not me.

They`ll let you have (as I understand it) 30 accounts linked to one bank card, and hence linked to one web-login. After 30, they will issue an additional bank card. Cheques are free, and monthly statements can be downloaded in PDF format (if you want one mailed to you, they charge one or two dollars a month).


I hope that helps a bit,

David.

 

[NickStewart]

QUOTE (TerryF @ Jan 5 2008, 09:50 AM) We have just received security deposit money for a rental and it is currently in our personal savings account while we figure out where we should put it. This will likely be a short term rental (less than 6 months). My question is this...... can the money be left in our personal savings account as long as the balance in the account doesn`t drop below the value of the security deposit we are holding?Any thoughts from the experienced landlords out there?Thanks,Terry

Hi Terry,

The law states you must use a trust account (sec. 44 of the Residential Tenancies Act of Alberta), but I suspect few landlords do.

Trust account

44(1) A landlord shall

(a) deposit each security deposit consisting of money received by the landlord into an interest‑bearing trust account at a bank, treasury branch, credit union or trust corporation in Alberta within 2 banking days after receiving the deposit, and

(b) ensure that the security deposit remains in trust until it is disposed of in accordance with this Act and the regulations.

(2) A landlord is the trustee of the money in a trust account on behalf of the tenant who paid it or, if the tenant has assigned the residential tenancy agreement with the consent of the landlord under section 22, the assignee.

(3) A landlord shall deposit only money that is a security deposit in the trust account.

(4) Money in the trust account is subject to this Act and the regulations and to the provisions of the residential tenancy agreement respecting security deposits that are not in conflict with this Act or the regulations.

(5) A landlord shall

(a) keep security deposit records that show with respect to each tenant

(i) the date of receipt of a security deposit by the landlord and the amount of the security deposit,

(ii) the date on which the security deposit was deposited in a financial institution and the name and location of the financial institution,

(iii) particulars of the interest payable and paid to the tenant, and

(iv) particulars of the disposition of the security deposit under section 46, including the manner in which the security deposit or part of it was delivered to the tenant,

and

(b) make the security deposit records available for inspection by the Director or an authorized person for the purposes of an inspection or investigation under Part 6.

(6) A landlord shall keep security deposit records under subsection (5) for at least 3 years after the expiration or termination of the tenancy to which they relate.

Nick

 

[GarthChapman]

Nick is right about the Trust Account requirement in Alberta, and I suspect his guess that few landlords do so is probably also correct.

At the very least, keep all your Security Deposit in a separate account and do not ever co-mingle it with any other monies. Once you build up enough you can buy a GIC and earn some interest with it.

Hope that helps,

 

[TerryF]

Thank you for these comments.

What`s interesting is that I suspected the money needed to go into a trust account of some kind, but when I went to deposit the cheque I asked about such a trust account for this purpose. I was told that there were no trust accounts for ordinary persons, only lawyers and other business companies, etc. So I asked them what accounts they had for this purpose and it was suggested that a savings account would work the best because there were no service charges. I couldn`t open the account that day (no-one at the bank to do it) so came back a couple of days later and then was told that I could co-mingle it with my own funds - just don`t let the balance drop.

So which banks are on top of this and know about the trust accounts? Is there another name for this product when I go in to request it, or is it just a "trust account"?

Thank you all for your help!

Terry