If my tenant just called me to tell me their rent check is going to bounce, can I use part of their security deposit to cover it until they can pay me again? I don't want my bank account to get overdraft fees. Once they pay me, I will return the funds to their escrow account.

Sure.

What causes your doubt that you could do that?

I called the realtor that wrote up the lease and they told me they couldn't advise me if I could do that because they weren't lawyers. I asked a friend just now who did study law and he said based on the lease I could only use it for "unpaid rents," and technically they paid.

Hello m:

Some states make you put the security deposit in an interest bearing bank account. Others don't. If your state doesn't mandate a specific treatment of security deposits, then what you do with the actual cash is not regulated. You can even spend it for dinner. As long as you can pay it back when you're required to, that's all that matters.

excon

It is in an interest bearing escrow account right now

From post #3 "technically they paid" I don't see that, if the check is going to bounce then they have not paid. Doesn't your lease have a paragraph covering what happens when a tenant is late with their payment, maybe a late fee?

Quote:

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Originally Posted by ballengerb1

From post #3 "technically they paid" I don't see that, if the check is going to bounce then they have not paid. Doesn't your lease have a paragraph covering what happens when a tenant is late with their payment, maybe a late fee??

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I agree.

A bounced check, or one that will bounce if tendered to the bank, is not payment of rent.

It does say if they pay after the 5th of the month I can charge a $50 late fee.

I will note, this is not what their security deposit is for. And I will be blunt and say something you won't like to hear, If you don't have enough money to cover one month rent in your own savings account, you have no business being a landlord. What if you had to have their sewer cleared tonight, what if their heater or air unit went out and it had to be replaced today, where are you going to pay this from?

What if they just don't pay you for two months or three while it takes you time to evict, where is the legal fees coming from.

Until it bounces it is not unpaid, and you can do what the lease allows, you can charge them a late fee, you can attempt to evict them.

Then that is what you should be doing, assess the late fee and have them resubmit a new check. You are not a bank but what you propose is like a loan using their security deposit.

If you are REQUIRED by State Law to hold their security in an interest-bearing account you cannot withdraw money to cover a bad check. If the rent is in an escrow account this is most likely your situation.

- and what everybody else said.