PROVIDENCE – The R.I. House of Representatives approved legislation on March 19 that would make it easier for financial institutions to offer escrow accounts to the general public, including landlords seeking to hold tenants’ deposits securely.
The measure, sponsored by Rep. Jason Knight, D-Barrington, establishes limits and protections for what the bill calls “special deposits” by individuals.
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Accounts would be governed by an agreement between the bank and the depositor or beneficiary.
Escrow accounts are already commonly used by corporations to hold money belonging to clients.
Mortgage holders, for example, use them to collect funds for property taxes and insurance, while lawyers often use them to manage client funds.
Knight said the legislation could provide landlords with a safe way to keep tenants’ deposits separate from their own funds.
“Having an escrow account would help small landlords keep their tenants’ security and other deposits separate from their own funds and would protect tenants if their landlord were to go bankrupt,” Knight said. “In that situation, their deposit wouldn’t be entangled in the bankruptcy, so they wouldn’t run into problems getting it back.”
The bill, modeled on a law adopted in 12 states, including New York, and developed by the Uniform Law Commission, does not require landlords to place deposits in escrow accounts. It simply facilitates their use for anyone who wants to set one up.
The legislation now heads to the R.I. Senate, where Sen. Mark McKenney, D-Warwick, has filed companion legislation.
Matthew McNulty is a PBN staff writer. He can be reached at McNulty@PBN.com or on X at @MattMcNultyNYC.
