My question is: is there any laws that prevent the property management co. from using other collected funds not allocated as the security deposit for work that was related to damage from the past tenant?

Or are there already laws that are set in place that will prevent us from creating our own agreement?

You do this for various reasons including preventing the seller from selling the property to another buyer without your knowledge.

Or another Make ready tech that can help with  work orders when needed.also preventive maintenance is vital and needs to be administered on a very tight program.

That creates a huge pressure on rents. 3) Demand / Supply: Strict zoning laws and NIMBY prevent overbuilding which keeps housing supply extremely limited.

To prevent the cash tie up that Ron mentioned we usually leverage the note with a bank or simply sell the note to a private investor. 

Nothing prevents you from contracting your replacement property prior to the closing of your sale.  

Not sure what would prevent you from doing this?

Also, closing will prevent them from going into foreclosure and losing the house.  

If they actually get in the courthouse door nothing prevents you from calling them up and trying to settle their claim outside of court.