I was managing a property, and the owner terminated the management agreement effective today. A tenant in the property previously notified us that he will not renew the lease. The lease ends 30 days from today. I have the security deposit in my trust account. What do I do with the security deposit?
The security deposit is a deposit given by the tenant to the landlord as security for the tenant's performance under the lease. The landlord must account to the tenant for the deposit at the end of the lease. Under most property-management agreements, the property manager holds the security deposit during the lease term on behalf of the landlord and accounts to the tenant for the landlord at the end of the lease term. Since you are no longer the landlord's agent, you should forward the security deposit to the landlord and remind him he has a duty to account for the deposit when the tenant vacates the property. You should send written notice to the tenant advising him that you are no longer the agent for the landlord, that you tendered the security deposit to the landlord, and that the landlord is responsible to account to the tenant for the security deposit. Alternatively, you and the landlord may agree that you will continue to hold the money and account for the security deposit, but such an arrangement should be stated in writing and be specific as to the parties' responsibilities, such as who will inspect the property for damage upon move-out and who will make determinations about any deductions.
One important note: Always send written notices to the landlord and tenants by certified mail especially when it concerns the security deposit.
Could we get a TAR attorney to comment on whether or not the security deposit should be held by the Landlord or the property manager…?
I would send the owner a form TAR-2210 and have him sign it. It is the NOTICE TO TENANT OF CHANGE IN MANAGEMENT AND ACCOUNTABILITY FOR SECURITY DEPOSIT.
It gets the money monkey off your back. Let the owner deal with the deposit and the tenants possible dispute. This will lower your liability and eliminate your stress level even more.