Owner held security deposits: When a rental owner holds tenant deposits

In other parts of the country, there is no such requirement and it's common practice for a rental owner to hold onto the security deposit money instead of a property manager.

In this article, you'll learn how to:

  1. Set up owner held security deposits
  2. Receive and deposit a security deposit to be held by the rental owner

1. Set up Owner held security deposits

The first step in recording a deposit held by a rental owner is to create a bank account called Owner Held Security Deposits, and an asset account on your chart of accounts.

  1. Navigate to Accounting > Banking.

  2. Click Add bank account.

  3. Add a bank account called Owner Held Security Deposits.

    This is a placeholder bank account that will not have a real world equivalent. It does not matter what type of account it is nor do you need a routing or account number. In the comments on the bank account write "to track security deposits held by rental owners."

    add_owner_held_bank_account.png

  4. Next, navigate to Accounting > Chart of Accounts.

  5. On the Chart of accounts page, add a new current asset account called Deposit Transfer. This is going to be the account type you use when representing a security deposit that has been sent to a rental owner.

  6. If you're just getting started with Buildium, you'll need to record any security deposits that are already held by the rental owners. To do this, add a beginning cash balance to the Owner Held Security Deposit bank account. Then, on each lease ledger, enter the opening security deposit balance by issuing a credit for the security deposit.

2. Receiving and deposit a security deposit payment to be held by the rental owner

If a tenant's payment is written directly to the rental owner, and does not touch the bank accounts you manage, there are two steps:

  1. Receive a payment from the tenant for security deposit liability.
  2. Deposit the payment into the Owner Held Security Deposits bank account.

If a tenant's check is written to the property management company. You need to deposit the money first and then disburse to the rental owner:

  1. Receive a payment from the tenant.
  2. Deposit the payment into your operating bank account.
  3. Record a check from your operating bank account to the rental owner.

    Use the Deposit Transfer asset account as the offsetting account. All other attributes of the transaction, such as the amount, date, and memo, should match the real world deposit you made.

    deposit_transfer_1.png

  4. Navigate to Accounting > Banking.

  5. Click on the Owner Held Security Deposits bank account.

  6. Use an other bank transaction to increase the Owner Held Security Deposits bank account balance. This represents that the security deposit is being held by the rental owner.

    Use the Deposit Transfer asset account as the offsetting account. All other attributes of the transaction, such as the amount, date, and memo, should match the real world situation.

    owner_held_2.png

Article #:111219

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