Date Published: December 2013
If a program participant leaves the program but remains in the unit for which the deposits were paid, the landlord will continue to hold the security deposit as provided in the lease, and the utility company will continue to hold any utility deposit as provided in the utility contract. The terms of the lease and state or local law will dictate what the landlord may do with the security deposit when the tenant leaves the unit. And the terms of the utility contract and state or local law will dictate what the utility company may do with the utility deposit when the utility contract terminates.
The ESG interim rule does not require security or utility deposits to be returned to the program either when the program participant leaves the program or when the lease or utility contract terminates. ESG recipients may establish their own policies regarding security and utility deposit repayments to the extent allowable under state and local law. However, any repayment of a security or utility deposit to the recipient or subrecipient (or contractor of the recipient or subrecipient) is program income under 24 CFR 576.2, must be used as match in accordance with 24 CFR 576.201, and must be tracked in accordance with the recordkeeping requirements for match and program income under 24 CFR 576.500(o) and 576.500(u)(3).