Las Vegas property owners must understand the proper way of handling a tenant’s security deposit. Nevada law requires that a tenant’s security deposit be held separate from an owner’s operating funds. The legislature actually passed a law that says a real estate property manager has to have two separate accounts. This is important to know, and it is especially important to understand that the tenant’s security deposit is not the owner’s money. Instead, it is the tenant’s money which is being held in trust by the owner in the event the tenant does not fulfill the terms of the lease.
The security deposit belongs to the tenant, so any interest earned also belongs to the tenant. You cannot take the tenant’s interest and apply it to your funds without the express written permission from the tenant. If you do not have permission to do so, you must leave the deposit and its interest alone. Trying to keep track of the interest earned on a tenant’s security deposit can be a bookkeeping nightmare for a property manager. Many times, we recommend allowing the security deposit to earn annualized points so that maintaining the security deposit in the trust account does not end up costing you money as the owner. It can save a lot of administrative work and ensure that the tenant is receiving a fair interest on the deposit.
When the tenant moves out, the security deposit must be accounted for and settled within 30 days of the tenant’s departure. You cannot decide to keep the security deposit simply because you did not like the tenant, your found him difficult, or you didn’t like the amount of notice he gave you or the way that he is leaving. You must have detailed invoices for any expenditure made against that security deposit. Make sure that any money you hold back from the deposit is accounted for. There should be descriptions and receipts and documentation that will help you prove beyond the standard of a reasonable person that the security deposit your tenant receives back is fair. Your accounting must meet the scrutiny of a court, because if you do not have a good reason for keeping the security deposit and you do it anyway, you will end up before a judge explaining why.
If you have any questions on security deposits and how to handle them, please do not hesitate to contact us at Blackbird Realty and Management.