PA Rental Security Deposit Escrow

[Percy N.]

PA Landlord Tenant Law states:

68 P.S. § 250.511b

§ 250.511b. Interest on escrow funds held more than two years

Currentness

(a) Except as otherwise provided in this section, all funds over one hundred dollars ($100) deposited with a lessor to secure the execution of a rental agreement on residential property in accordance with section 511.11 and pursuant to any lease newly executed or reexecuted after the effective date of this act shall be deposited in an escrow account of an institution regulated by the Federal Reserve Board, the Federal Home Loan Bank Board, Comptroller of the Currency, or the Pennsylvania Department of Banking. When any funds are deposited in any escrow account, interest-bearing or noninterest-bearing, the lessor shall thereupon notify in writing each of the tenants making any such deposit, giving the name and address of the banking institution in which such deposits are held, and the amount of such deposits.

(b) Whenever any money is required to be deposited in an interest-bearing escrow savings account, in accordance with section 511.1, then the lessor shall be entitled to receive as administrative expenses, a sum equivalent to one per cent per annum upon the security money so deposited, which shall be in lieu of all other administrative and custodial expenses. The balance of the interest paid shall be the money of the tenant making the deposit and will be paid to said tenant annually upon the anniversary date of the commencement of his lease.

(c) The provisions of this section shall apply only after the second anniversary of the deposit of escrow funds.

Does this mean:  Q1. Escrow accounts are only needed for deposits over $100 AND if kept over 2 years? (i.e. if your lease is only 1yr, then you technically do not need to deposit it in an escrow account?)  Q2. You do not need a specific escrow account per lease/tenant? Can you have one account and place deposits there? Q3. You do not need to give the escrow account number to the tenant (just the name and address of the bank)? These questions are to educate myself and minimize unnecessary steps, if any to streamline operations. Again, not saying I would do this, just trying to understand what is required.

[Matt A.]

IANAL - talk to one specifically for your situation.

Personally I open an escrow for every tenant, its really quite simple. My bank(s) (using two at the moment, transitioning) both offer this and its no charge. I put them into interest bearing accounts and reconcile it monthly in Quickbooks... that's actually harder than opening the accounts (Quickbooks).

As we have a master LLC holding company for each sub-LLC (one per property) it does create a little administrative crap, mostly for the bank to set it up - however its a great way to stay in good graces with the law, and I spell it out for ALL tenants that this is how its done (surprisingly many landlords are unaware of this in PA). It also take any temptation away to co-mingle funds, and really helps keep the books squeaky clean - again, just how we run our shop.

Good luck