Who should hold my tenants security deposit?
Many landlords want to hold on to the security deposits for their tenants so that they can use the funds in case the rent comes in late.
As a landlord, you might be thinking that you can use your tenants security deposit when your tenant’s rent is late, and then replenish the security deposit when the rent comes in.
This is an illegal practice called commingling which is defined as illegally using other people’s funds given to you in trust and meant for a specific purpose.
If you as a property owner renting your home in Colorado have received any information telling you that you CAN use your tenant’s security deposits to pay your bills, be careful.
As stated above this is illegal and your tenant can take you to court.
In fact the Colorado Department of Regulatory Agencies (DORA) cites that one of the top Colorado Real Estate Commission Violations IS “Theft of Security Deposits Held in Trust/Escrow Accounts” as noted in Chapter 20 of the Colorado Real Estate Manual.
DORA requires that a Property Management company holds tenant’s security deposits in a separate trust account. Not only does this ensure that security deposits can only be used for repairs to a home, it also protects the funds from potential lawsuits made against the property management company or the landlord.
We believe the reason why some property management companies want to have the landlord hold the security deposit is simply less paperwork and the ability to have less staff, and decrease their liability.
At Legacy Properties-PM, we pride ourselves in being an outstanding member of NARPM® which holds us to a higher code of ethics.
We never have nor will we ever have a landlord hold a security deposit. We work very hard to screen all of your tenants to ensure that they WILL not have difficulty paying their rent on time. If there becomes a problem we follow a set of procedures to collect rent from delinquent tenants.
If you have received ANY communications concerning using your tenant’s security deposit for ANYTHING other than its intended use, or if you have any questions at all about security deposits and your rental home in Denver, Aurora call 720 989 1996, read our property management FAQ, or contact us.