Landlords throughout the United States are required to use escrow accounts as a method for efficiently managing important tenant-related funds. Escrow accounts are primarily used to help ensure that a tenant’s security deposit remains in a highly secure location and can be easily accessed following the conclusion of their contract. Setting up the escrow account is the responsibility of the landlord or property owner, not the tenant.

In California, a landlord may not collect more than two months of standard rental fees as part of a security deposit for an unfurnished apartment. Once a tenant decides to move out of the property, landlords are required to return all or part of the deposit within 21 days. If the landlord has decided to deduct funds from the deposit, this must be explained in writing to the tenant and include an organized list of all deductions from the account. Once the deposit has been removed, the escrow account can be closed. Landlords are required to establish new escrow accounts for each new tenant.


Before you head to the bank to create an escrow account for your property, you may need to review all applicable state and county laws. For example, the county of San Francisco dictates that landlords must place a tenant’s security deposit in an interest-bearing escrow account. For each year the tenant remains in the property, the landlord must pay back the interest accrued on the deposit to the tenant.

Failure to follow these regulations could result in stiff penalties for landlords, which is why it is imperative to make sure your escrow account is fully compliant with the law before moving ahead.



When you are ready to create the account, you will need specific information pertaining to both you and the tenant. This information includes the name and Social Security number of the new tenant, as well as your own name and Social Security number. Without this information, you cannot move forward with creating the account.

A landlord should keep accurate accounting records related to a rental business, including the tenant security deposit. Again, many states have rules about how to handle the money. Some of them require the landlord to keep the tenant security deposit with a local bank in an interest-bearing account.



Assuming the tenant is owed some or all of a security deposit, the landlord is responsible for returning the money after the lease terms are met. Again, each state stipulates how long a landlord has before returning a tenant security deposit.

In some states, for instance, a landlord must return a security deposit within 14 business days from the end of a tenancy. In addition, if any deductions have been made from the deposit, the landlord must include an itemized list explaining the reason for each deduction and the amount being withheld. Other states require an itemized list but allows for 30 days before the security deposit must be returned.

Keep in mind that you must have a legitimate reason for withholding all or part of the security deposit. A landlord who wrongfully withholds a security deposit or does not follow other parts of state law (such as sending the deposit within the stipulated time frame) could be liable if a tenant pursues legal action in small claims court. For example, some states say a tenant may be awarded any amount of the security deposit wrongfully withheld plus up to $250 in penalties as well as court costs.



There are five generally accepted reasons why a landlord may keep all or part of the tenant security deposit. Again, this will vary from state to state, but here are the basics:

  1. Damage to the property that is above normal “wear-and-tear”
  2. Cleaning costs if a tenant has left the property with excessive trash or left behind furniture that needs to be removed
  3. Nonpayment of rent
  4. Tenant breaks the lease
  5. Unpaid bills



When choosing an escrow company there can be many important factors to evaluate. Fees, location, staff and even recommendations from friends and colleagues are all things to consider. With Citrus Heritage Escrow by your side, you can rest assured that when you receive your settlement check, you have gained the maximum benefit from your home sale or purchase.

Call us today with any questions or concerns. Our professional Escrow Agents will help you through this exciting yet confusing process. (951) 335-7200