Holding Security Deposits for RI Multi Family

[Thomas Stanley]

Morning BP,

I’m excited to say that I am approaching my first closing for a multi family property in Rhode Island.

Its been a long road with lots of ‘cleaning my truck’ exercises along the way but here I am. Pretty excited and a tinge of nerves all at the same time

Looking for any advice from those with experience:

How do you handle security deposit funds? I believe this varies state by state and was wondering if I need a proper escrow account with a bank, w-9s from tenants etc. or if I can just open a savings account and hold security deposits there.

Thanks,

Tom

[Colleen F.]

No need for escrow here is where the landlord tenant guidelines should be but the link on the new and improved government site doesn't work.   http://www.sogs.ri.gov/assets/downloads/documents/s...   why they don't leave these things alone I don't know.

Here is the handbook, I think but I can't be certain if this is the most recent one. 

https://www.courts.ri.gov/Courts/districtcourt/PDF...

[Frank Patalano]

Congratulations. In Rhode Island you do not need to do anything special with security deposits. Technically, you don't even need a separate account but I think that's a good idea.

[Nancy DeSocio]

Congratulations, @Thomas Stanley!  Sounds like you've gone well past just "cleaning the truck"...good luck on your journey!

[Thomas Stanley]

@Colleen F. - Thanks for the steer.  My question actually came up after reading the handbook and not seeing anything about accounts in the deposits section.  Good to know I'm not losing my mind.

[Colleen F.]

@Thomas Stanley nope not losing your mind yet.  That is all there for guidance although you can read the actual laws they say the same thing.  best practice is run all your rental stufff through a separate cc and bank account even if you don't use a separate entity. It will also make it easier to track expenses. Good luck.

[Anthony Thompson]

@Thomas Stanley I second the recommendation to keep the security deposits in a separate account, if only to keep your bookkeeping and record keeping easier.

Also, this is an unlikely/slim chance, but if you were ever asked about, in eviction court, how you handled the security deposits, I think it's a mark of professionalism to have kept them in a separate account. It shows that you treated them separately, not mixing them with "your" operating funds but treating them as the tenants' funds (which they are) and putting them aside.

I haven't found a newer edition of the RI Landlord-Tenant Handbook than the 2007 one, though I do keep looking. There have been a number of minor tweaks/changes over the years since that time, so it's probably overdue for an update, but as always, what budget will that project come out of...

That Handbook is basically a friendly / human-readable version of the laws themselves, which are obviously the most up to date, if a little terse. But if you do have a question or something is unclear from the Handbook I'd recommend going directly to the source, the Residential Landlord and Tenant Act statutes.

It will probably be more accessible than you expect, though it's really just a starting point for a discussion with an attorney if there are any questions remaining. And you should probably build a relationship with an attorney familiar with RI evictions, if you're going to own a multi in RI anyway :)

[Hideyuki Gojima]

@Thomas Stanley

I understand it is a bothersome it is better to keep the security deposits separated. 

If you are reluctant to open a separate bank account, you should at least separately record the security deposit in your financial statement and label it as a restricted cash and keep the record of incoming wire or check. 

Good luck!

[Thomas Stanley]

Originally posted by @Hideyuki Gojima:

@Thomas Stanley

I understand it is a bothersome it is better to keep the security deposits separated. 

If you are reluctant to open a separate bank account, you should at least separately record the security deposit in your financial statement and label it as a restricted cash and keep the record of incoming wire or check. 

Good luck!

Thanks Hideyuki - I wouldn't call it bothersome at all.  Personally I was just asking to be sure I wasn't going to do it wrong :) 

[Brandon Ingegneri]

Throw them in a separate account just to be safe. Make sure you provide the entitled refund within 20 days of the tenant vacating and providing a forwarding address and you’ll be in good shape.