In some states collecting last month’s rent on move-in is treated the same as a security deposit. Essentially, rent collected in advance is not considered rent until it is due and payable. Be careful that you observe that law. Penalties for noncompliance can be severe. The safest thing to do is to simply collect a sufficient amount of security deposit to mitigate risk, and not generate some complex scheme.
One fallacy in collecting the last month’s rent is that you never know for certain when that last month will be. Let’s say you have a 1 year lease and your tenant has paid you in advance for the last month’s rent. Six months into the lease, she stops paying rent because she lost her job. She tells you she hopes to have a new job soon. You inform her she must move or pay rent. When can you apply the last month’s rent? Technically, it is not disbursable until it becomes due and payable, which is her last month occupying the premises. What if she remains in the property for more than a month from your demand to move? If you disbursed funds, you may be deemed in error and even in breach of agreement.
Here’s another problem this policy creates: Can you process for eviction after delivering demand to pay or move, even though you have the last month’s rent on deposit? How will a judge interpret that? There would be no question at all about it if the money was held as a security deposit, but as last month’s rent, the answer is not so clear. I would not want to test that defense.
Daniel R. Wilhelm
Managing Broker
3 Options Realty, LLC.
http://www.3optionsrealty.com
678-397-1282
3 Options Realty is committed to providing Georgia's best property management services. But in the unlikely event that a landlord…
Read More
A dream tenant on move-in day can turn into an eviction case six months later. Missed rent, damage to your property,…
Read More
Are you struggling to maintain multiple rental properties? Have you recently purchased your first real estate investment, but are feeling overwhelmed…
Read More
Most property management companies are designed around the departmental organizational structure. 3 Options Realty is much different and there are…
Read MoreThe author of this Blog is not an attorney. Nothing written should be construed as legal advice. Conclusions conveyed are outcomes based upon practical experience and should not be depended upon to be a common outcome of other similar circumstances.
As a rental owner, hiring a property management company not only saves you money, time, and stress but also improves…
Read More.webp)
When maximizing rental income, effective property management is required to keep your tenants happy and protect your investment. At 3 Options…
Read More
As a real estate investor, engaging a property management company to care for your investment is a big decision. You…
Read More.webp)
Are you looking to hire a property management company? If so, working with a reputable service provider is a wise…
Read More