There are two main processes in the lifecycle of a tenant security deposit:
Your individual requirements may vary depending on local rules and generally accepted practices. If you're not sure, seek out the advice of your accountant or real estate commission.
Click the links below to learn about the steps you need to take in Buildium during move-in and move out.
1. How to handle a security deposit upon move-in
1. Charge the tenantShowHide
The first thing that needs to be entered before you receive a security deposit from a tenant is a charge.
Entering a charge for the security deposit liability will help tell the system that there is no balance owed for the deposit once you receive the payment.
When you create a lease, there is a field where you can enter the charge amount for the security deposit. If you didn't enter a charge during lease creation, you can add a manual charge to the ledger instead.
2. Receive the paymentShowHide
Once the security deposit has been entered on the ledger, you can enter the deposit payment from the tenant.
If you're just starting out with Buildium and have already entered the opening balances for your security deposit bank accounts, you can issue a credit for the security deposit amount for all your current tenants.
For new tenants moving forward, you'll need to navigate to their lease ledger and receive a payment to balance out the charge.
3. Deposit the paymentShowHide
After the security deposit has been entered as received, it will need to be shown as deposited into the proper bank account in Buildium.
If the deposit is being held by the owner instead of your company, click here to learn how to track owner held security deposits.
If the security deposit is being held by your company, navigate to Accounting > Banking. The payment that was entered on the tenant ledger will be sitting in the undeposited funds of the default bank account of the property, which was selected during property set-up.
Click on the default bank account, then click Record deposit.
On the record deposit screen, change the bank account to the account where the security deposit will be kept in the real world, fill out the form and select the deposit payment, then click Save.
2. How to handle a security deposit upon move-out
Upon move-out, there are several different scenarios you may run into.
Click the link below to review the scenario that fits your needs.
1.Refund the full amount of a security depositShowHide
Refunding the full amount of a security deposit to a tenant is the most straightforward process to track when a tenant moves out. Navigate to the tenant's lease ledger, and issue a refund out of the bank account the security deposit money is being held in.
2. Withhold funds from a security deposit to cover expensesShowHide
If you need to use money from a security deposit because a tenant is being charged for damages or other costs upon move out, you will need to navigate to the tenant's lease ledger and withhold the funds.
Withholding a security deposit means you are a turning a liability into income to cover any outstanding balances. The first step in withholding a deposit is to make sure that all oustanding charges the tenant owes have been entered. Once all charges have been entered into the lease ledger, you can click Withhold deposit.
Once the deposit has been withheld, the money will be shown as available cash for the property and the owner, and can be used towards any expenses.
To learn more about other security deposit subjects, click the links below.
- Security deposit interest
- Owner held security deposits
- Transferring a deposit to a new property management company
- Transferring a deposit to new unit or lease