Understanding Security Deposits

During the life cycle of a lease, property damage that exceeds normal use may occur. Landlords collect a deposit from tenants to cover such damages. Such deposits are considered security deposits.

Security deposits form part of the general information of a lease. You can enter the security deposit information during the general lease entry process. Enter each deposit as a separate row in the grid.

You can define types of security deposits during the implementation of PeopleSoft Lease Administration. Security deposit types enable the system to track whether the security deposit is a charge (cash), guarantee, or prepaid. If the deposit type is a cash deposit, then the deposit amount can generate a bill or payment depending on whether the lease is of payables or receivables type. If the deposit type is a bank guarantee or letter of credit, no processing is done as no cash is collected. Guarantor is a required field for a bank guarantee type of deposit. If the deposit type is prepaid, no processing is done when it is established, as the security deposit transaction has already been taken care of ahead of time. During the refund process, however, the system treats a prepaid deposit as a cash deposit, and includes it in refund processing.

If you want to increase or decrease the security deposit or change the payee or payor while the lease is active, you must create an amendment. You should handle security deposit values adjustments in a transactional sense. To increase the security deposit, add another row with the incremental additional amount. To reduce the security deposit, add another row with the amount to be reduced as a negative value. If you change the payee or payor for the security deposit on an amendment, the system uses the new payee or payor to process the refund.

As the landlord, you can refund the security deposit to the tenant if the damages to be collected do not exceed the amount of the deposit and a cash deposit from the tenant is outstanding when a lease is terminated. During the refund process, you can also add interest to the deposit amount or deduct for additional damages.