How to Setup a Security Deposit Account

20 Nov

By Attorney George Warshaw
MetroBoston Publication Date: November 20, 2013

 

There’s more to it than you may think.

First, the account has to be set up within 30 days of when the security deposit is paid, and the tenant given notice of the account within that 30 days period.

Second, it must be placed in a bank located in Massachusetts. You can’t use Fidelity to hold the money and you can’t deposit it in another state.

So you can’t set it up at Bank of America in New Hampshire or Citizens in Rhode Island. The account branch has to be located in Massachusetts.

Most banks have what they call security deposit accounts; basically a savings or escrow account that pays interest. Usually the name of the account identifies it by the words “Tenant’s Security Deposit Account” or some variation.

I use TD Bank. TD has a special Security Deposit Account Agreement that complies with the law. Five other banks I surveyed don’t use any special agreement. Therefore, I can’t tell if the account just sounds nice or actually complies with the legal requirements.

Last, landlords have to give tenants notice about the account every year. Make it easy on yourself. Have the printed monthly bank statement sent directly to the tenant. They get the info required and you can always access it online.

 

© 2013 George Warshaw.  George Warshaw is a well-known attorney and author. He represents buyers and sellers of homes and condos in Massachusetts, litigates real estate matters, and prepares wills, trusts, and estate plans. George welcomes new clients and questions. Contact him at metro@warshawlaw.com.

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