My state (Maryland) requires me to have a separate bank account (escrow) for the security deposit collected from the Tenants.
My questions:
1) Do banks have separate bank account for such a purpose or just a normal checking/saving account will suffice?
2) Can this account be re-used for other tenants once the first tenant moves out?
3) Are there any fees associated with such bank account?
Per Md. REAL PROPERTY Code Ann. § 8-203:
(d) (1) (i) The landlord shall maintain all security deposits in federally insured financial institutions, as defined in § 1-101 of the Financial Institutions Article, which do business in the State.
(ii) Security deposit accounts shall be maintained in branches of the financial institutions which are located within the State and the accounts shall be devoted exclusively to security deposits and bear interest.
(iii) A security deposit shall be deposited in an account within 30 days after the landlord receives it.
(iv) The aggregate amount of the accounts shall be sufficient in amount to equal all security deposits for which the landlord is liable.
(2) (i) In lieu of the accounts described in paragraph (1) of this subsection, the landlord may hold the security deposits in insured certificates of deposit at branches of federally insured financial institutions, as defined in § 1-101 of the Financial Institutions Article, located in the State or in securities issued by the federal government or the State of Maryland.
(ii) In the aggregate certificates of deposit or securities shall be sufficient in amount to equal all security deposits for which the landlord is liable.
As such, one or more accounts at your preference; it's up to the bank how to treat the account, so it may be a personal account or it may be a 'commercial' account depending on how they treat it (but it must be separate from your personal funds). A CD is perhaps the easiest way to go, as it's not a separate account exactly but it's easily separable from your own funds (and has better interest).
You should also note (further down on that page) that you must pay 3% interest, once per six months; so try to get an account that pays as close as possible to that. You likely won't get 3% right now even in a CD, so consider this as an expense (and you'll probably find many people won't take security deposits in many situations as a result).
In Massachusetts, we have a similar law. Each tenant fills out a W9 and the account is in their name. You need to find a bank willing to do this at no cost, else fees can be problematic. With today's rates, any fee at all will exceed interest earned.
