CATHERINE M. MATTHEWS (R), GRI
Broker-In Charge, Callahan Realty, Ltd.
Past President, Oahu Chapter
National Association of Residential Property Managers
Q. I met a rental agent at a potential rental for my family, when I discussed the process of renting the home she told me I needed to make the security deposit check out to her personally. Is this legal? Are there different laws when renting from an owner vs. renting from a management company when it comes to the security deposits? Am I entitled to earn interest on the deposit amount?
A. If the agent is a professional property manager in Hawaii and she manages units for more than one individual, then she is required to be licensed. The licensing law, Chapter 467-1.6, states that the principal broker shall have direct management and supervision of the brokerage firm and its real estate licensees and are responsible to have a client’s funds held in a client trust account.
Therefore, if she is asking you to write the check directly to her – and she indeed is a licensed real estate agent – then she would be in violation of the law.
When it comes to handling the security deposits – the law is the same for licensed property managers and homeowners who are managing their own properties. The Residential Landlord Tenant Code – Chapter 521 – regulates how security deposits must be handled. Chapter 521 states that the security deposit means money deposited by or for the tenant with the landlord to be held to:
1) Remedy tenant’s defaults for accidental or intentional damages resulting from failure to comply with the section 521-51 (Tenant Obligations), for failure to pay rent due, or for failure to return all keys, including key fobs, parking cards, garage door openers, and mail box keys, furnished by the landlord at the termination of the rental agreement.
2) Clean the dwelling unit or have it cleaned at the termination of the rental agreement so as to place the condition of the dwelling unit in as fit a condition as that which the tenant enters into possession of the dwelling unit: and
3) Compensate for damages caused by a tenant who wrongfully quits the dwelling unit.
4) Compensate for damages under subsection (b) caused by any pet or animal allowed to reside in the premises pursuant to the rental agreement: and 5) Compensate the landlord for moneys owed by the tenant under the rental agreement for utility service provided by the landlord but not included in the rent.
The amount of the security deposit must equal to or less than one month’s rent and shall not be considered as payment of the last month’s rent by the tenant, unless it is mutually agreed upon, in writing.
At the termination of a rental agreement in which a security deposit is held, the landlord will notify the tenant in writing what – if any – portion of the security deposit will be retained to remedy tenant defaults. The written notice will include reasoning for retaining the funds and include written evidence of costs, such as estimates or invoices. The written notice and attached evidence must be mailed to the tenant, at an address supplied to the landlord by the tenant, with accepted proof of mailing and postmarked before midnight of the fourteen day after the date of the termination of the rental agreement. Tenant has up to one year to contest the complete or partial retention of the security deposit after the termination of the rental agreement.
Regarding your question about interest, the Residential Landlord Tenant Code does not require interest to be paid on security deposits.