Q: What is the penalty for not having a separate trust account for a rental deposit?
A:
While I am not aware of any penalties, there are benefits to keeping a separate bank account for security deposits. For one, if you are sued, bank records are open to discovery. As such, if you put the deposit in a separate account then you do not necessarily need to divulge your personal records because they are most likely not relevant. That is not always the case but it can help to build that argument.
That being said, it is the landlord’s responsibility to account for the security deposit. The Tenant is giving you that deposit to hold, only if needed. It is not for your daily shopping. As such, a separate bank account is best practice.
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