§3251. Lessee’s deposit to secure lease; retention by lessor; conveyance of leased premises; itemized statement by lessor

A. Any advance or deposit of money furnished by a tenant or lessee to a landlord or lessor to secure the performance of any part of a written or oral lease or rental agreement shall be returned to the tenant or lessee of residential or dwelling premises within one month after the lease shall terminate, except that the landlord or lessor may retain all or any portion of the advance or deposit which is reasonably necessary to remedy a default of the tenant or to remedy unreasonable wear to the premises. If any portion of an advance or deposit is retained by a landlord or lessor, he shall forward to the tenant or lessee, within one month after the date the tenancy terminates, an itemized statement accounting for the proceeds which are retained and giving the reasons therefor. The tenant shall furnish the lessor a forwarding address at the termination of the lease, to which such statements may be sent.

B. In the event of a transfer of the lessor’s interest in the leased premises during the term of a lease, the transferor shall also transfer to his successor in interest the sum deposited as security for performance of the lease and the transferor shall then be relieved of further liability with respect to the security deposit. The transferee shall be responsible for the return of the lessee’s deposit at the termination of the lease, as set forth in Subsection A of this Section.

C. Paragraph A of this Section shall not apply when the tenant abandons the premises, either without giving notice as required or prior to the termination of the lease.

Added by Acts 1972, No. 696, §1. Amended by Acts 1974, No. 697, §1; Acts 1981, No. 499 §1; Acts 1985, No. 578, §1.

I don’t find anything about “segregating” security deposits in LA.

Hi All,

Here in the State of Washington, where I operate my own property management and maintenance company for which a real estate broker’s license is required, we also are required to maintain a separate security deposit ‘trust’ account for the ‘tenants’ funds. These are not the owner’s funds . . . they belong to the tenants.

As a management company, we are audited about every two years by the Department of Licensing . . . they walk in and want to see books now . . . no scheduled appointments. That is one of the first things they check . . . how are the security deposits handled.

However, owners are not audited as we, licensed real estate brokers/agents, are. So they fly under the radar more often than not. The only time they may get a ‘visit’ is if a tenant files a complaint.

Even without the overly burdensome governmental regulations, it is just a good idea to keep that money separate and never consider it to be yours until the move out inspection is done and you know if they’re giving it up.

Good discussion and information on the LLC’s v. Trust. There are also many tax advantages to trusts depending on which type you select.

Good luck.


good to know. lots of weird little laws out there.

also interesting to note:

I found that some states limit how much security deposit you can charge. (limited to 30 day’s rent, etc).

Texas has no such limit, BTW.

It’s unfortunate that the gov’t can regulate how much some one puts down as a deposit. I have a tenant with “less than perfect credit”. She gladly put down a very sizeable security deposit in order to get the rental. I don’t see a problem with it.

Hi SpaceAce,

In WA, we are not regulated as to how much we can charge for a deposit . . . only with regard to the way it is held and accounted for from beginning to end. Our company charges anywhere from a minimum of $300 to $2000 on a high end house.

What state are you in?


Where I am we have no law regarding deposits. As far as I know.
We have rules regarding comingling though.

Quick question. I formed an LLC last year in March. My intention is to refinance my principal residence - transfer ownership to the LLC/Trust - and then rent the property.

  • Wy would you use a general warranty deed and not a quitclaim?

  • Once I refi my property and transfer title to the LLC - the property is still on my credit - right?

  • If so, and I want to by another home to occupy personally, will the bank allow it - seeing as I have 1 mortgage on my credit?

Thanks! :smile