Security Deposit Transfer Agreement: Guide for Landlords and Tenants

Introduction

Key Things to Know

1. 1

   Security deposit laws vary significantly by state and sometimes by city, so the transfer agreement should be tailored to comply with local regulations.

2. 2

   The agreement doesn't change the terms of existing leases - the new owner must honor the original lease terms regarding security deposits.

3. 3

   Both buyers and sellers should keep copies of the agreement and related documentation for at least the duration of existing leases plus any statute of limitations for potential claims.

4. 4

   Security deposits must typically be transferred at closing, along with accurate accounting records for each deposit.

5. 5

   Some jurisdictions require security deposits to be held in separate interest-bearing accounts, and this obligation transfers to the new owner.

6. 6

   The agreement should specify how any pending deposit disputes or claims will be handled between buyer and seller.

7. 7

   Tenants retain all rights to their security deposits regardless of property ownership changes.

8. 8

   Failure to properly transfer security deposits can result in penalties, including potential damages beyond the original deposit amounts in some jurisdictions.

Oregon Requirements for Security Deposit Transfer Agreement

• Oregon Security Deposit Transfer Requirement (ORS 90.300(13))

  When selling a property with existing tenants, the seller must transfer all security deposits to the buyer, who becomes responsible for these funds. The buyer must notify tenants of the transfer within 30 days of the property transfer.

• Security Deposit Accounting Requirements (ORS 90.300)

  The agreement must include a detailed accounting of all security deposits being transferred, including the tenant name, unit number, deposit amount, date collected, and any deductions already made.

• Security Deposit Limits (ORS 90.300(5))

  The agreement must acknowledge Oregon's limitations on security deposit amounts, which cannot exceed the rent for one month unless the tenant agrees to a higher amount in writing for specified conditions.

• Separate Account Requirements (ORS 90.300(2))

  The agreement should address the requirement that security deposits must be held in a separate account maintained in Oregon financial institutions, and specify how this account will be transferred or established by the new owner.

• Interest on Security Deposits (ORS 90.300)

  While Oregon law does not require landlords to pay interest on security deposits, if the original rental agreement provided for interest payments, this obligation must be transferred to the new owner.

• Tenant Notification Requirements (ORS 90.305)

  The agreement must specify that the new owner will provide written notice to all tenants regarding the transfer of ownership and security deposits, including the new owner's name, address, and contact information.

• Prepaid Rent Transfer (ORS 90.300(13))

  Any prepaid rent must be transferred to the new owner along with security deposits, with clear accounting of the rental period covered by such payments.

• Pet Deposit Transfer (ORS 90.300)

  If pet deposits were collected separately from general security deposits, these must be specifically identified and transferred with appropriate documentation of pet agreements.

• Indemnification Clause (Oregon Common Law)

  The agreement should include provisions where the seller indemnifies the buyer against claims related to security deposits collected but not transferred, and the buyer indemnifies the seller against claims arising after the transfer date.

• Compliance with Fair Housing Laws (42 U.S.C. § 3601-3619; ORS 659A.145)

  The agreement must acknowledge that the transfer of security deposits will be conducted in compliance with federal and state fair housing laws, without discrimination based on protected classes.

• Disclosure of Existing Claims (ORS 90.300)

  The seller must disclose any pending disputes or claims related to security deposits, including any tenants who have given notice to vacate or who have pending maintenance requests that might affect deposit returns.

• Compliance with Deposit Return Timelines (ORS 90.300(10))

  The agreement must address Oregon's requirement that security deposits be returned within 31 days after tenancy termination, and specify which party is responsible for deposits for tenants vacating around the time of property transfer.

• Documentation of Property Condition (ORS 90.300(9))

  The agreement should include provisions for transferring tenant move-in inspection reports and other documentation of property condition that may affect future security deposit returns.

• Assumption of Lease Terms (ORS 90.310)

  The new owner must agree to honor all terms of existing lease agreements, including any special provisions regarding security deposits or their return.

• Truth in Lending Act Compliance (15 U.S.C. § 1601 et seq.)

  For properties with federally related mortgage loans, the agreement should acknowledge compliance with TILA requirements regarding the disclosure of security deposit transfers as part of the real estate transaction.

• Bankruptcy Protection Provisions (11 U.S.C. § 541)

  The agreement should address how security deposits will be handled in the event of bankruptcy by either the buyer or seller, recognizing that security deposits may be considered trust funds not part of a bankruptcy estate.

• Record Keeping Requirements (ORS 90.300(14))

  The agreement must specify that all records related to security deposits will be transferred to the new owner, who must maintain these records for at least two years after the tenancy terminates.

• Withholding Disclosure Requirements (ORS 90.300(12))

  The agreement should address Oregon's requirement that landlords provide written accounting of any security deposit withholdings, and ensure that the new owner has sufficient information to comply with this requirement.

• Remedies for Non-Compliance (ORS 90.300(16))

  The agreement should outline the legal remedies available to tenants if security deposits are not properly transferred or accounted for, including potential penalties of up to twice the amount wrongfully withheld.

• Governing Law and Dispute Resolution (Oregon Common Law)

  The agreement should specify that it is governed by Oregon law and establish a process for resolving any disputes between buyer and seller regarding security deposit transfers.