Handling money electronically has tremendous value not only for tenants, but also for owners, vendors and property staff. In this article, we’ll explore top considerations for managing money for your rental properties, including both tenant and owner funds.
Handling tenant funds
Handling tenant deposits can be a more complicated subject than you might think. State laws vary when it comes to the amount, deadline for returning after your tenant vacates and the acceptable bank account types used for securing the funds. For example: Texas has very little on the books regarding the handling of a tenant security deposit. There is no maximum amount allowed for security deposits or for pet deposits. The only thing stated implicitly is that the security deposit must be returned within 30 days. However, in Pennsylvania, the statutes are lengthy and specific. As an example, a maximum security deposit for the first year of rental cannot exceed two months’ rent and after the second anniversary of giving the deposit, the tenant is entitled to the interest earned. The property manager or owner must maintain a separate security deposit account, and after two years, funds over $100 must be deposited in an escrow account in a federally or state-regulated institution.
The laws governing rent payments vary from state to state as well, from whether or not a notice is needed on a rent increase to the maximum charge permitted for a late fee. In Arizona, for example, there is no notice required when raising rent, but in Minnesota, the landlord must give written notice one rental period plus one day prior to the change. As late fees go, Maine allows a charge of no more than 4% of the rent amount and only if the landlord notifies the tenant at the time of the rental agreement signing. In Tennessee, late fees may climb as high as 10% of the rent.
Whether you receive funds physically or electronically, the rules apply. With electronic rent payment, there are additional benefits and potential problems to consider. Can you legally require your tenants to pay this way? What about late fees?
Handling owner funds
Owner funds are another animal all together. Few laws exist governing property manager and property owner business relationships. This is on you to make sure that your business practices regarding your client's property and money are treated with precise scrutiny, otherwise your business could develop a bad reputation.
A good property management software can help you be a stellar partner to your property owners. Being a meticulous record keeper is key. An ability to provide a clear audit trail for all funds for each property you manage will help with everyone's peace of mind. Agree ahead of time on when you will mail checks and statements to your clients and stick to it!
For an in-depth look at these potentially puzzling issues from electronic payment and processing regulations and the entities involved with them to the laws that impact your business, join Matt Davis at our RealWorld Conference this July, on Monday the 17th at Wynn Las Vegas.