Why Do I Need to Track Tenant Security Deposits?

We all know why security deposits exist. They function as insurance for the landlord that their property will be taken care of while the tenants live there.

They are also an incentive for the tenants to look after the property to the best of their abilities. Most tenants want to receive their deposit back when they move out. Clearly, a security deposit is not the landlord’s money to keep. In fact, many states have laws requiring landlords to pay back the deposit. Regardless of this fact, many landlords struggle to keep accurate records of these important deposits. Often when this happens, the bank balance does not agree with the landlord’s records.

Why Are Security Deposits Important?

Each state has its own laws pertaining to security deposits. For this reason, it can be a challenging system for landlords to navigate. However, you should be aware of some best practices. You want to keep your deposits safe and protect yourself from lawsuits. In a bookkeeping sense, it’s helpful to keep the money received for a security deposit in a separate account. In fact, many states require this.

When security deposits are accurately recorded in your records, it makes the entire process easier. These funds can be used to pay for damages. However, they should not be used to cover normal wear, cleaning costs between tenants, unpaid rent, a tenant breaking their lease, or any unpaid bills. Finally, it’s hard to identify where the money went when it’s not accurately recorded in the landlord’s records. This could result in legal problems.

Some states require an itemized list of reasons for keeping the security deposits. For other states, the deposit must be returned within two weeks. Regardless, when the records do not match what is in the bank for the security deposit, these tasks are more challenging for the landlord. 

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Not only can they be more challenging, but not tracking these deposits can have legal ramifications. Separation is key so these problems don’t arise. Security deposits do not belong to the landlord and should not be kept in the same accounts.

Amy Heinen, Quickbooks Proadvisor says, “Making sure your Security Deposit Trust account always reconciles to the Security Deposit Liability account will safeguard the funds that will be paid back to a tenant or used to repair a rental unit.  It’s important to be sure the amount in the bank is sufficient to cover the liability.” The most important thing in your business is protecting yourself and your business.


STRATAFOLIO can help you not only with keeping track of each one of your tenant security deposits from each one of your units but also with aggregating your security deposits liabilities across your entire organization. With STRATAFOLIO, in just one click of your mouse, you are able to view your global security deposit liabilities for which your organization is liable. Or, you can keep drilling down to find out what the liability is per each legal entity, asset, building or unit.

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With STRATAFOLIO, you will reduce countless headaches and eliminate wasted time from you and your team when you need to reconcile account balances for each property. STRATAFOLIO tracks the money received as a deposit when the tenant moves in. Likewise, we track the deposit returned to the tenant when they leave the unit. If the tenant is responsible for repairs on that unit, STRATAFOLIO will track that as well, and we will adjust your security deposit liability accordingly.

With the above image, a STRATAFOLIO user will see the exact security deposit liability balance for each building. With STRATAFOLIO’s help, you can keep better records of your properties, and save yourself a lot of time. Below is a diagram illustrating how we do this for you.

With STRATAFOLIO, you are in control! Give us a call today to see how we can help your team!


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Why Do I Need to Track Tenant Security Deposits?
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Why Do I Need to Track Tenant Security Deposits?
As a landlord, if you are collecting security deposits, you need to maintain clean security deposit records for each of your buildings.
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