Security deposit interest owed?!
Bellefontaine, OH · Member since 2018 · 20 posts · 2 votes
Security deposit interest owed?!
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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
7y@Shane R Smith you can read the law here: Ohio Deposits
Can I give you a word of advice? If your tenant is educating you on the law, you are failing as a Landlord. This is a sign you are in over your head and facing future problems.
I highly recommend you learn the local, state, and federal statutes and how they affect you. If you fail in something as simple as paying interest, it can cost you a lot of money in court and a lot of time and headaches. And that's just a 5% interest requirement! Just imagine the trouble you can get yourself in if you violate Fair Housing, zoning laws, or a myriad of other areas.
Consider buying "Every Landlord's Legal Guide" by NOLO. It has practical advice on how to manage a home, shows you what your state laws are regarding major items like deposits, and it points you to the law so you can read it for yourself. You can educate yourself now or learn the hard way later.
The DIY Landlord Book4.7248 Reviews
17 Replies
- Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes7y
@Shane R Smith you can read the law here: Ohio Deposits
Can I give you a word of advice? If your tenant is educating you on the law, you are failing as a Landlord. This is a sign you are in over your head and facing future problems.
I highly recommend you learn the local, state, and federal statutes and how they affect you. If you fail in something as simple as paying interest, it can cost you a lot of money in court and a lot of time and headaches. And that's just a 5% interest requirement! Just imagine the trouble you can get yourself in if you violate Fair Housing, zoning laws, or a myriad of other areas.
Consider buying "Every Landlord's Legal Guide" by NOLO. It has practical advice on how to manage a home, shows you what your state laws are regarding major items like deposits, and it points you to the law so you can read it for yourself. You can educate yourself now or learn the hard way later.
The DIY Landlord Book4.7248 Reviews - Investor · Columbus, OH · Member since 2015 · 134 posts · 48 votes7y
How long has she been in the property? Did she give you a deposit in excess of the monthly rental amount?
- Real Estate Agent · Virginia Beach, VA · Member since 2012 · 2k+ posts · 1k+ votes7y
Yes, there are states requiring paying interest on tenant deposits, even when the deposit does not make that much in an interest-bearing account. I count it as a rental expense. Read your landlord/tenant deposit requirements carefully as some states require it be deposited in a bank with a branch in the state and/or that you provide notice within x days to the tenant of where their deposit is held. Even in states without the requirement, I provide the tenant with a statement from the escrow account at lease end showing the actual interest paid during the time their deposit was held and use that total amount as starting point for any deductions, or I return the entire amount with actual interest if no deductions necessary. Courts are usually very serious and tenant-friendly about security deposit problems, so no reason to poke the bear.
- Attorney · Columbus, OH · Member since 2018 · 55 posts · 47 votes7y
What effort are you referring to in the OP?
- Bellefontaine, OH · Member since 2018 · 20 posts · 2 votes7y
Originally posted by @Nathan Gesner:
@Shane R Smith you can read the law here: Ohio Deposits
Can I give you a word of advice? If your tenant is educating you on the law, you are failing as a Landlord. This is a sign you are in over your head and facing future problems.
I highly recommend you learn the local, state, and federal statutes and how they affect you. If you fail in something as simple as paying interest, it can cost you a lot of money in court and a lot of time and headaches. And that's just a 5% interest requirement! Just imagine the trouble you can get yourself in if you violate Fair Housing, zoning laws, or a myriad of other areas.
Consider buying "Every Landlord's Legal Guide" by NOLO. It has practical advice on how to manage a home, shows you what your state laws are regarding major items like deposits, and it points you to the law so you can read it for yourself. You can educate yourself now or learn the hard way later.
Nathan, in over your head and double checking my understanding is two different things. I would see a double checking as a move that a new landlord takes to become a good landlord. Thanks for the advice!
- Bellefontaine, OH · Member since 2018 · 20 posts · 2 votes7y
Originally posted by @Sean Dawson:
How long has she been in the property? Did she give you a deposit in excess of the monthly rental amount?
Sean,
The tenant has been renting for 37 months. We just purchased at the end of Feb 2019. Rent is $615 & deposit is $575. It's not in excess which, with my understanding, does not constitute interest.
Thanks,
- Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes7y
The tenant is educating you about the law. If you haven't educated yourself in the first place, how are you "double-checking" your education now? And why are you asking a bunch of strangers on the internet that don't know your state laws.
How did I find the answer? I searched a known, trust-worthy, objective, legal resource that includes your state statutes. I'm in Wyoming and found your answer in less than one minute by going to the source.
I'm seriously not trying to insult you. I want to point out that you are responsible for knowing the law and applying it fairly. You shouldn't rely on your tenant to tell you and you shouldn't "double-check" by asking a bunch of clueless strangers. Figure out how to find the source of information and educate yourself. When your tenant quotes a law, you should be able to respond off the top of your head or at least with a quick review of your notes.
From what I can see, you owe your tenant interest because you held their funds for more than six months. It doesn't matter if you think it's a small amount or not.
The DIY Landlord Book4.7248 Reviews - Accountant · Tulsa, OK · Member since 2018 · 312 posts · 349 votes7y
@Shane R Smith I'd just check with a local attorney, I'm sure they can give you the answer fairly easily, however in my opinion (I am not a lawyer and this is not legal advice) based on the review of the Ohio legal code at http://codes.ohio.gov/orc/5321.16, it says "Any security deposit in excess of fifty dollars or one month's periodic rent, whichever is greater, shall bear interest..." Since you're security deposit is less than one month's rent it's my personal opinion that you don't owe your tenant any interest. Although this goes counter to @Nathan Gesner's opinion that you owe interest, I 100% agree with him that this is something you should already know as a landlord. Also, is your tenant really going to put up a fight over ~ $90? Seems like small potatoes to me.
- Attorney · Columbus, OH · Member since 2018 · 55 posts · 47 votes7y
Crowd-sourcing legal advice from non-lawyers is rarely advantageous. I was surprised at the conclusion reached by Nathan that you'd owe interest on a deposit if you held it more than 6 months. Then I went to the NOLO link, and was even more surprised to see how bad their summary of Ohio law is regarding security deposits. I'm not sure I want to even check on how bad it may be regarding anything else.
I'm obviously biased towards retaining a professional to help you in matters like this because it is how I make my livelihood. Note that I said livelihood, as in, I follow developments in landlord/tenant law for a living. You can read the statutes yourself (you linked to the applicable one here) and you can read guidance as it comes out from HUD, etc. You can probably do this while juggling another job if you are so inclined. But even if you do these things, you are going to miss out on a huge chunk of the law in court decisions applying the statutes. These are not as readily available as the statutes (searchable databases require subscription fees) and require some expertise to efficiently find applicable decisions. I would suggest that you should learn the basics, and I can tell you are trying to do so through your original question, but I'd consider linking up with someone who deals with exactly these sort of issues for a living. It isn't going to cost you an arm and a leg (just a finger or two) and you'll probably end up saving money by not following bad legal advice from strangers.
- Bellefontaine, OH · Member since 2018 · 20 posts · 2 votes7y
Originally posted by @Nathan Gesner:
The tenant is educating you about the law. If you haven't educated yourself in the first place, how are you "double-checking" your education now? And why are you asking a bunch of strangers on the internet that don't know your state laws.
How did I find the answer? I searched a known, trust-worthy, objective, legal resource that includes your state statutes. I'm in Wyoming and found your answer in less than one minute by going to the source.
I'm seriously not trying to insult you. I want to point out that you are responsible for knowing the law and applying it fairly. You shouldn't rely on your tenant to tell you and you shouldn't "double-check" by asking a bunch of clueless strangers. Figure out how to find the source of information and educate yourself. When your tenant quotes a law, you should be able to respond off the top of your head or at least with a quick review of your notes.
From what I can see, you owe your tenant interest because you held their funds for more than six months. It doesn't matter if you think it's a small amount or not.
Nathan,
A couple things
Foremost, the very first line calls out Ohio landlords. So I wasn't calling strangers from other states. Just ones from my state. Secondly, I have a handy dandy copy of those laws on my night stand for reading even booked marked. That's where the pasted portion came from in my original post. Trust me I have read them. But as you and I are human we once and awhile second guess ourselves when someone looks at it from a different point of view. That different point of view being yours and hers. So I wanted to clarify my interpretation with fellow landlords from the state I'm working out of.
I did order your book you recommended as additional information. This info will further build my understanding of the do's don't in Ohio.
Thanks,
- Attorney, CPA, Broker & Author · Scottsdale, AZ · Member since 2018 · 532 posts · 488 votes7y
@Shane R Smith Find local legal counsel and buy an hour of their time. During that hour, you can ask them not only questions about the security deposits, but any other questions you have. This is all part of the learning process
- Member since 2016 · 13k+ posts · 12k+ votes7y
The statute you posted is as straight forward as you can ask for. You do not require a "lawyer" to interpret what is straight forward. You pay interest on any portion of a deposit which is in excess of one months rent. As a example if rent is $600 and you charge a deposit of $610 you would owe 5% interest on the $10 above monthly rental amount of $600.
You would pay interest on any deposit over $50 if the monthly rent is less that $50 per month. If the monthly rent is in excess of $50/month you pay interest on any portion of the deposit which exceeds the monthly rent.
- Denton, TX · Member since 2018 · 30 posts · 15 votes7y
Originally posted by @Thomas S.:
The statute you posted is as straight forward as you can ask for. You do not require a "lawyer" to interpret what is straight forward. You pay interest on any portion of a deposit which is in excess of one months rent. As a example if rent is $600 and you charge a deposit of $610 you would owe 5% interest on the $10 above monthly rental amount of $600.
You would pay interest on any deposit over $50 if the monthly rent is less that $50 per month. If the monthly rent is in excess of $50/month you pay interest on any portion of the deposit which exceeds the monthly rent.
I agree with this post. IANAL, but IMO, you owe no interest.
- Member since 2019 · 2 posts · 0 votes6y
I came here because I googled a closely worded subject. I have a room for rent and I do collect $600 deposit from the tenant and the rent is $600 per month. After a 19 month tenancy, my renter has moved out and I will be deducting some of her deposit money for repairs. I'm in a tight spot to have to pay an attorney to answer questions like; What is the amount I should owe her - is it $3.00? (.05x6.0) And, does it apply only if she gets a refund/return amount from that deposit fund? Another question I can't find the answer to is; She gave her 30 day notice November 8th, but moved out earlier on the 17th of November. She didn't turn in her keys until December 8th. So, technically - what is the last day of her tenancy? This is important because I only have 30 days to return money to her (if it doesn't exceed $600 for damages and repairs.) Thanks!
- Bellefontaine, OH · Member since 2018 · 20 posts · 2 votes6y
Jamie,
Do your laws actually say you owe interest? In our case in Ohio it's only owed if you hold a deposit greater that the monthly rent. Example if rent is $600 but we collect $800 security deposit due to sub on at credit or something. In that example we would owe interest on anything in excess of $600.
As for the 30 days. Do you have it in writing that she gave her 30 days on the 8th? If so you have 30 days after the final agreed upon move date. Not the one she's decided to move on after the fact. She also owes all utilities, of her responsibility, until that agreed date also.
I hope this helps!
-Shane
- Member since 2019 · 2 posts · 0 votes6y
Thank you Shane for helping to clarify..... Actually, her rent started at 600 a month and the deposit given was $600. On the 13th month, I increased rent to $625.
She gave verbal notice - not written.
She moved her property out on the 17th of November, but her mother came back the week after (to paint) . The last time anyone came into the apartment was November 24th. ... But she still held onto the key till December 8th. when she and her mother came to return the keys on the 8th of December, they demanded her deposit return at that time and I said I technically I have 30 days to return any monies due. The tenants mother refused to get me a forwarding address or her daughter and told me to send it to her, instead & gave me a PO box number. I've never worked at the post office before, but I don't think you can send certified letter to a PO box.
Her rent included all utilities, she didn't have to pay for anything else to live there.
I'm in Stark county. (OH)
I consider these type of people ignorant to knowing Real Estate laws & rules for the Ohio landlord and tenant. (She told me that no landlord ever deducts money from the security deposit to clean up, after the tenant moves out)
Someone has to pay to get this efficiency into move-in condition and restore it to the way it was, when she moved in. I know it's within my legal rights to charge her for anything that is not considered normal wear and tear... And I have photographs for documentation. Dealing with irrational tenants you need to be extra careful, and that's why I was googling to find Ohio law solutions, regulations and rules.
- Bellefontaine, OH · Member since 2018 · 20 posts · 2 votes6y
Originally posted by @Jaime Mansfield:
Thank you Shane for helping to clarify..... Actually, her rent started at 600 a month and the deposit given was $600. On the 13th month, I increased rent to $625.
She gave verbal notice - not written.
She moved her property out on the 17th of November, but her mother came back the week after (to paint) . The last time anyone came into the apartment was November 24th. ... But she still held onto the key till December 8th. when she and her mother came to return the keys on the 8th of December, they demanded her deposit return at that time and I said I technically I have 30 days to return any monies due. The tenants mother refused to get me a forwarding address or her daughter and told me to send it to her, instead & gave me a PO box number. I've never worked at the post office before, but I don't think you can send certified letter to a PO box.
Her rent included all utilities, she didn't have to pay for anything else to live there.
I'm in Stark county. (OH)
I consider these type of people ignorant to knowing Real Estate laws & rules for the Ohio landlord and tenant. (She told me that no landlord ever deducts money from the security deposit to clean up, after the tenant moves out)
Someone has to pay to get this efficiency into move-in condition and restore it to the way it was, when she moved in. I know it's within my legal rights to charge her for anything that is not considered normal wear and tear... And I have photographs for documentation. Dealing with irrational tenants you need to be extra careful, and that's why I was googling to find Ohio law solutions, regulations and rules.
You are correct on deposit return. You have 30 days. The address is interesting. I would send it as a package with a tracking number if they don't do certified. That way you have proof of ship and receive.
in the future I would request that the tenant gives you the 30 days notice in writing just so it's very clear.
Charging for cleaning can be done but I wouldn't do it to nit pick. Dont forgot what court fees a lawyers cost even if the tenant uses them as a scare tactic. So make sure it's a fine balance for cleaning related. If it's blatantly filthy... Take photos before cleaning to compare to the move in photos that way it's clear if they decide to push the subject.
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