Is it normal for a management company to withhold repaid rent?

[Aaron Xie]

Good morning, BP fellows.

I have a rental property in Indianapolis managed by a big PM company. They tell me that the tenant has paid three months rent in advance. However, they have to withhold the extra two months' rent and transfer when the months come.

This scenario is not covered in the contract. So I am wondering if this is the industry standard? Thanks in advance.

[Matt Devincenzo]

This is what my PM is doing right now as well. The reason is that that rental income hasn't been "earned" yet. If you were in control of the place and managing yourself, you would need to be escrowing those funds in a separate account and then only "receiving" them as the individual months passed. It protects the tenant from ending up in a situation where the property is unusable to them for a period of time and they needed to have that money repaid. So if they paid it out right now and then next month the home burned down you would need to reimburse them those funds. It is much easier to make sure that happens correctly when the control of those funds is still in the hands of the PM who would be dealing with the tenant side of things in a situation like that.