Who holds the rent and security deposits when you hire a property manager?
It depends on the agreement. Many managers collect rent and deposits into a trust account they control and then pay you your share, and the California Department of Real Estate says rents and security deposits are trust funds. Others deposit straight into an account in your name. Ask which model you are signing, and get the account type, the records and the payment dates in writing.
Two common setups
Setup one is a manager trust account. Tenant payments go to an account the manager controls. The manager pays bills from it, keeps its fee and sends you the rest, usually on a set day each month. Setup two is an owner account. Rent lands in a bank account in your name, and the manager has limited access to pay approved bills.
| Question | Manager trust account | Account in your name |
|---|---|---|
| Who holds the money first | The manager | You |
| Who can see the balance | Whoever the manager gives access to | You, directly |
| What to ask for | Statements, records per owner, proof of reconciliation | A list of who can move money and limits |
| Where deposits sit | In the trust account, by tenant | In your account, tracked by tenant |
This is general information, not legal advice. Licensing and trust account rules differ by state; check your state real estate commission and ask a local attorney about your situation.
What a trust account should have on record
The California Department of Real Estate describes three records for each trust account: a control record that documents every transaction with a running balance, separate records for each beneficiary or transaction, and a reconciliation that compares the total of the separate records to the control record on the same date, with a record of each reconciliation kept. Your state may word its rules differently, but these are good things to ask any manager to show you.
The separate record is the part that matters most to you. It is the page that should show your rent in, your fees and repairs out, your tenants' deposits held and your balance.
What to ask before you sign
- Is the account a trust account, and in what name is it held?
- Where are tenant security deposits held, and are they kept apart from rent?
- How often are the records reconciled, and can you see a sample?
- On what day each month do owner payments go out, and what delays them?
- What happens to deposits and the account if you end the agreement?
Example a made-up owner has four units and the manager reports $3,600 of tenant deposits held. The owner asks for the separate record and finds it lists $3,200. The manager corrects a late deposit entry and sends a revised statement, and the owner keeps a copy.
Where owners get surprised
Assuming deposits are in your account. In a manager trust account setup, the manager holds them and your agreement says how they transfer if you leave.
Not asking whether rent and deposits are kept apart. Many owners prefer them in separate places so the deposit balance is easy to see.
Never asking for the per-tenant record. The total in the account matters less than the record that shows each tenant's deposit and your share of rent.
Not planning for the end. A termination clause that says nothing about deposits can delay a handover. Ask for a deadline and a final reconciliation in writing.
Forgetting state rules on deposit handling and interest, which vary. Check your state before you decide where deposits should sit.
How DoorKeeping fits
DoorKeeping is not a property manager and does not change what a manager owes you. It is software for owners who manage their own units, at $2 per unit per month with every feature included. DoorKeeping never holds your money and sends a payment only when you approve it. If you keep your own copy of rent and deposits in DoorKeeping, you have something to compare a manager's statement against.
Sources
Questions
- Are security deposits trust funds?
- The California Department of Real Estate says rents and security deposits are trust funds. Other states have their own rules, so check yours.
- Can I see the trust account balance?
- Ask for statements and the record kept for your property. Put the reporting schedule in the agreement.
- What if the manager holds my deposits and leaves?
- Your agreement should say how deposits and records transfer. See the handover checklist for ending a contract.