Landlords in Tampa, Florida are required to hold tenants’ security deposits in escrow. The term escrow refers to the process of one party holding something of value for another party until a specific date. As a landlord, you’re holding that deposit for your tenant until the end of the lease. Your escrow account can also be used to hold any advance rent that a tenant gives you before moving into your property. The local laws require you to hold escrow in specific ways.
First, you’ll need to open a separate account specifically for the escrow funds. You cannot put the security deposit in your own bank account or allow it to mingle with your personal money. It’s not permissible for you to use the escrow funds during the course of the tenancy. Open a new account and don’t hold any money in that account other than the tenant’s money.
Use a Florida Bank
When you open a separate account for the escrow funds, it must be at a bank in Florida. You cannot use federal credit unions and you cannot go to an out-of-state branch of a major bank such as Bank of America to open the account. The purpose of this law is to ensure that those funds are regulated by Florida. If you live in another state and rent out your property in Tampa, you’ll need to find a Florida bank for your escrow account.
Non-Interest Bearing Accounts
You can use an interest-bearing account to hold the escrow funds, but then you’re responsible for paying interest to your tenant. You’re required to provide 75 percent of the interest you earn or five percent of the deposit that was paid – whichever amount is higher. This will require a lot of extra steps that you don’t need. While earning a little interest may seem attractive, it’s not worth the effort. Use a non-interest bearing account to keep your process efficient and free from scrutiny.
You are required to tell your tenant how and where you are holding the deposit. When you include the information in your lease, you’re taking care of the requirement and documenting that the tenant has been informed. Answer any questions the tenant may have and explain the importance of complying with the landlord/tenant laws.
Holding escrow for your tenants is not complicated, as long as you follow these particular requirements. If you have any questions, or need help with security deposits, contact Hoffman Realty in Tampa.