Changes to Missouri Statutes Affecting Security Deposits
By: Jason Simmons | Published October 26, 2016
During the 2016 legislative session, the Missouri General Assembly adopted House Bill 1862, which was signed into law by Governor Jay Nixon on July 14, 2016. The new bill went into effect on August 28, 2016. What is the significance of this new law and why am I writing a blog post about it? Because one of the provisions this law significantly changes is how landlords must deal with security deposits received from residential tenants.
In essence, the new law requires that landlords hold all residential tenant security deposits in trust. Tenant security deposits held in trust must be held in a bank, credit union or other deposit institution which is insured by an agency of the federal government. The security deposits must not be commingled with the landlord’s other assets. Any interest on the security deposits held in the trust account will belong to the landlord, and those amounts should be withdrawn regularly and placed in the landlord’s other accounts. However, the landlord is also responsible for all bank costs and service charges associated with creation and maintenance of the account.
The new law applies generally to all residential landlords, except certain housing authorities, government entities acting as landlords, or those individuals who are also licensed real estate brokers and follow other rules applicable to real estate professionals. It does not apply to non-refundable pet security deposits, which landlords may continue to keep and hold in their own accounts. It is important to note that the new law applies to existing tenant leases, whether written or oral.
So, what must landlords do to comply with the new law? They should open up a new trust checking account with their financial institution, provided it is federally insured. However, to be able to open up this account, the landlord will have to adopt a trust agreement. Additionally, landlords should modify their written lease agreements to update language on their security deposits so that it complies with the new law.
This is where Cripps & Simmons can help. With many years of experience in writing and administering trusts, we can help create a document that complies with the law. We can also help with providing sample language for your written lease agreements, or if you prefer, we can provide you with a new lease agreement that complies with Missouri and other local laws which may apply.
If you are a landlord that has questions about your lease agreement, or how to comply with the new law, please call and schedule an appointment. One of our attorneys would be more than happy to assist you with these matters.