Security Deposit Dispute: How Long To Hold Money in Escrow?

Question

Property manager is holding security deposit (several thousand dollars) in

escrow. Landlord makes claims against a large portion of security

deposit upon tenant moving out. Tenant disputes the claims. Property

manager continues to hold funds in escrow pending resolution, however,

no resolution is reached.

Tenant is in process of filing small claims case but hasn't yet. Meanwhile,

the property manager notifies tenant that they are going to close it out

and issue payments (meaning payment to the landlord for his claims and

payment to the tenant for the undisputed portion of the security

deposit).

Questions:

Can the property manager issue these payments from escrow if the

dispute has not been resolved? Or does the security deposit need to

continue to be held in escrow by the property manager? Is there a time

limit for the funds to be held in escrow by the property manager?

Joe Norman · Answer

What I don't understand is why the landlord is "making claims", that complicates the issue. Isn't it the PMs job to assess damage and stand behind their assessment?Also how was the "claim" documented? Was there an itemization of costs? Was it delivered via certified mail (or whatever the requirement/standard is in your state)?To answer your question, I would think that Yes, the PM can distribute the SD as they see appropriate. Depending on the jurisdiction they probably have a set amount of time to do this so they don't want it sitting in their escrow account beyond that.

Michael Smythe · Answer

Took me seconds to Google this... http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Displ...

Bill B. · Answer

The same can be said for the tenant. What is their risk for challenging it in court? Trying to win on a technicality, a lost receipt, or a failure to show by the landlord, especially if he’s from out of state. Is anyone going to fly to Florida to fight a claim? If it’s allowed, they probably can’t even hire someone to fight it without losing money. Even a local landlord may have to take a vacation day from their job, costing them more than the claim the tenant made up. No matter who wins, the other party is going to feel cheated. Let us know when you know what happened.

Greg Smith · Answer

Thanks. I will tell you what one attorney told me. He said Florida is a very friendly state to landlords. In some states, if a tenant wins in court, they can be awarded 2-3 times the amount of the security deposit, and this potential risk keeps landlords on the up and up. However, in Florida, this is not the case. In court, the tenant is merely fighting to recover the amount of the security deposit. The only risk to the landlord is having to pay the tenant's court costs if he loses.

Bill B. · Answer

It shouldn’t matter who holds the money until the court case. But that court case should have been scheduled a couple months ago. The property owner will need to provide receipts of actual money spent on professional cleaning, they can’t charge to clean themselves. So they shouldn’t profit from making the claim, I don’t see the upside to them if their claim is made up. I didn’t see a penalty for not refunding it all within the allotted time (Some states award 2-x3 to the tenant for not returning it quickly, never any bonus to owners.). I suggest you tell them to switch to a different PM in the future as this one seems to be subpar. Maybe reach out to another PM now and see what they would have done differently if anything. Good luck.

Bill B. · Answer

There is a magic website on the internet called Google…6. Returning a Tenant’s Deposit In regards to security deposits, the Florida statute requires a landlord to return a tenant’s deposit within 15 days after they move out. In addition, the landlord must also include any interest accrued. If there are any deductions, then the Florida landlord must notify the renter within 30 days of their intention. Failure to do this within 30 days, the landlord forfeits their right to make any deductions. If the renter doesn’t object to the deductions, then the landlord has 30 days after the initial written notice to return a portion of the deposit to the renter. However, if the tenant objects, then the landlord can move to a small claims court.https://www.managecentralfloridaproperty.com/florida-securit....That being said, as others have stated, I have zero clue a to why the owner is even involved. That’s my PM’s job to bring the property back to pre-rental condition and deduct expenses, returning the rest to the tenants within deadlines. . Assuming weird Florida rules/laws and that the tenants and the property owner are going to be in small claims court then definitely the PM shouldn’t be holding any money. They should disburse it all. IMHO.

Chris Seveney · Answer

@Greg SmithThis sounds like the property manager is not involved and does not want to be held responsible. As mentioned by another poster, why are you a determining damages, but not the property manager. It’s typically their job to determine what these were. Out of curiosity, can you provide us with the list and cost of the damages? How are these documented?

Michael Smythe · Answer

Check your state laws.In Michigan, the landlord is supposed to file a small claims case if they want to keep the security deposit over tenant protests.

Greg Smith · Answer

Tenant was in the home for 1 year. Storm happened in month 2 of the lease. The storm ripped the roof, soffits, and fascia off the side of the house where the carpet and paint damage occurred. Water streamed in through the light fixtures and vents during the storm and whenever it rained in the days and weeks to follow. Water seeped in through the ceiling. If it happened to rain while the tenants were not home, they returned to soggy carpeting in places. Tenant has photographs of water stains and places where the paint bubbled up. The roof remained exposed for 3 weeks after the storm when a tarp was eventually put in place. The soffits and fascia were repaired 5 weeks after the storm. A new roof was installed 9 weeks after the storm. The property owner had his insurance adjuster come through the interior of the home 3 weeks after the storm, and the tenants accompanied the adjuster and property owner pointing out the damage. The adjuster took several photographs. Interestingly enough, while the roof was eventually repaired, nothing was ever done to the interior of the home in the months which followed, all the way through the end of the lease. The water stains remained in the walls and ceiling. The carpeting was never addressed. No mold inspection ever occurred.

Chris Seveney · Answer

@Greg SmithThat is going to be a very tough cell especially if there were storm damage and there wasn’t 100% replacement after that damage. What does the property manager say? Also, how long was this tenant in the property there is this thing called wear and tear that you should be replacing carpet and painting units every few years. If this tenant was in there for more than two years should be the responsibility of the owner to go and repaint.