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Transferring Security Deposits Between Tenants/Units (Accrual Accounting)

How to handle security deposit transfers between tenants or units in Property Matrix

Andy Goh avatar
Written by Andy Goh
Updated over a month ago

Transferring a security deposit between tenants can be necessary for various reasons, such as when the primary tenant moves out, but the security deposit remains with the lease.

In addition to transferring deposits between tenants, this guide also covers transferring security deposits between units and correcting errors in security deposit invoices. These processes ensure effective and accurate handling of tenant transactions in Property Matrix.

Changing Primary Tenant:

  1. Navigate to the specific Unit under Properties page

  2. Switch to the Lease tab, and then the Details sub-tab

  3. Expand the Lease Information, and select the Primary Tenant field to edit

Steps to Transfer Security Deposit:

Original Tenant (who initially paid the deposit):

  1. Create a Security Deposit Application:

    1. Navigate to the Transactions tab for the tenant.

    2. Click on the New button, and select Security Deposit Application

  2. Generate an Invoice:

    1. Go back to the Lease page to create a New Invoice

    2. Choose an appropriate account, and set the item type to any item type.

  3. Apply the Security Deposit Application to this Invoice:

    1. Go back to the Transactions tab, and edit the Security Deposit Application to the newly created Invoice

      • This removes the security deposit liability from the original tenant's account.

      • The security deposit amount moves into the selected pass-thru account.

New Tenant (receiving the deposit):

  1. Create an Invoice with the Security Deposit item type.

  2. Create a Credit Note:

    1. Navigate to the Transactions tab, click New, and select Credit Note

    2. Note: Use the same account item as the original tenant's invoice.

  3. Apply the Credit Note to the Invoice:

    • This will create a security deposit balance for the new tenant.

    • The pass-thru account will return to zero.

Important Note:

  • The bank account will still reflect the original security deposit payment from the initial tenant.

  • Transferring the security deposit between tenants does not affect the bank account balance.

  • These processes are entirely managed within Property Matrix, ensuring no actual bank accounts are affected. This simplifies both the operation and bookkeeping for security deposit transactions.

Transferring a Tenant’s Security Deposit Between Units

When a tenant is transferred from one unit to another, their security deposit must be reassigned appropriately.

  1. Process a Refund for the Old Lease: Begin by refunding the security deposit associated with the tenant's old lease. This action ensures that the deposit is completely disassociated from the old unit.

  2. Address the New Lease: Once the refund is processed, create a new deposit entry for the tenant's new lease. This ensures the financial records reflect the deposit in alignment with the tenant's new unit. This methodically aligns deposit records with tenant location changes, reducing administrative confusion.

Correcting Errors in Security Deposit Invoices

Mistakes in security deposit invoices can be rectified efficiently using a step-by-step process:

  1. Understand the Issue: Realize that applied security deposit payments cannot be directly modified.

  2. Create a New Invoice:

    • Navigate to the invoice creation module.

    • Insert a new line item marked as Security Deposit.

    • Enter the corrected or additional amount as required.

  3. Verify Correct Totals: Since all security deposits are pooled together in Property Matrix, the system ensures that combining deposits maintains accurate records. By following this procedure, errors in financial documentation are minimized, preserving the integrity of tenant and deposit records.

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