Different rules for disbursement of rent payments Money sometimes should go to escrow account


March 01, 1998

Dear Mr. Azrael:

I have a rental property in Maryland managed by a rental agent. They were paid a year's rent in advance, which I feel should be paid to me, minus their management fee. They tell me that according to state law, this money was placed in a non-interest bearing account. Is this correct?

David P. Carwithen

Mount Airy

Dear Mr. Carwithen:

If your rental property is commercial (not occupied by a residential tenant), then there is no requirement that any part of the rent be held in a separate account. In a commercial lease, the entire year's rent could be paid to you immediately, subject to the rental agent's agreed fee.

If this is a residential property, different rules apply under Maryland statutes:

* Security deposits. If any part of the advanced payment is considered a "security deposit," the landlord must hold the security deposit in a separate account in a banking or savings institution in Maryland. If you transfer the property, the security account would be turned over to the new owner. Interest must accrue at six-month intervals on a security deposit in an amount of 4 percent per annum.

No more than two months' rent per dwelling unit can be taken as a security deposit.

* Rent payments. If the residential lease calls for monthly or periodic rental payments, the rental agent probably is correct to hold the advance rent in a separate escrow or trust account. The amount of rent due each month would then be paid to you from the trust account.

Under state law, a licensed real estate broker must maintain a trust account.

You and the tenant may jointly instruct a real estate broker to deposit the funds in an interest-bearing trust account.

If the real estate broker does not receive instructions, an amount of trust money less than $5,000 must be deposited in an account that earns interest payable to the Maryland Housing Resource Corporation.

If the amount of trust money is $5,000 or more, the broker may (but is not required to) deposit the money in such an account or may deposit the money into a non-interest-bearing account.

If your lease specifically requires the tenant to make a single, lump-sum annual rent payment, the entire sum, less the agent's fee, could be paid to you immediately. However, this would be an unusual situation for a residential lease.


The Sun invites you to send real estate questions to our weekly Mailbag.

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Pub Date: 3/01/98

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