Many landlords take a deposit from a prospective tenant to hold an apartment prior to move-in. I require a deposit when there is more than 1 week before the start of the new lease. State law is very clear on how this process must be executed when renting Investment Property in Minnesota:

1. The agreement must be in writing and signed by both the landlord and prospective tenant.
2. That agreement must specify under what circumstances the deposit will be returned to the prospective tenant.
3. If the above circumstances occur, the landlord must return the deposit within 7 days.
4. Once the landlord and tenant enter into a lease agreement, the money must be applied toward the tenant’s rent or security deposit. Any payments for tenant screening are not included in this requirement.

If the landlord violates any of these requirements, s/he is liable to the prospective tenant for 150% of the deposit amount. Once the landlord and tenant sign a lease and the landlord complies with #4 above, this law no longer applies. The moral of the story is: make sure everything is in writing!

See Minnesota Statute 504B.175 for more information

**2009 Update:  The new Minnesota Certificate of Rent Paid is here.** This is just a reminder to all the Minnesota Investment Property Landlords in the audience. You are required to send a Minnesota Certificate of Rent Paid to your tenants by January 31, 2008.

This is a simple form that your tenant can use when submitting their taxes. Depending upon their income, they may be eligible for a tax deduction for a portion of the rent they paid for 2007. Although you must send your tenant this form, this does not affect any taxes you pay or anything else. It is simply for their tax purposes.

The instructions are rather lengthy (and like any other government form, rather confusing). Without going into great detail, here are some of the tips and tricks that I have figured out over the years:

• Only rent paid by the tenants is used in the calculation (any Section 8 or other rent subsidies are not included). In my accounting system, I mark each subsidy payment in the memo field to make this easier at the end of the year.
• Do not include any damage deposits, late fees, or other non-rent payments.
• I typically only include actual rent paid, not rent billed (or accounts receivable).
• Fill in a copy of the form with your business information and make copies to save yourself time when completing many of them. With almost 30 rental units, you can imagine how much time this saves me!
• I do not try and track down past tenants and send them these forms. If they are interested, I let them call me (again, there is no penalty for not sending these forms of for them being late).
• You must divide the rent paid by the total number of adults (married couples are considered 1 person) in the unit regardless of how much rent each paid. You should then send a form to each adult.
• To save on postage, I send their monthly statement in the same envelope.

You can purchase software packages or services to do this work for you, but I have always found they are expensive. The easiest way I found to get these done is do a couple each night until you have them all finished. Turn the music on and just fill them out!