1. (a) Except as provided in subsection (b), a lessor may not accept payment from a lessee and hold the amount of the payment in a reserve account for future payments. Any amounts paid by a lessee must be applied:

   1. (1) as an initial rental payment;
   2. (2) as a regular rental payment; or
   3. (3) to an accrued additional charge under IC 24-7-5 .

2. (b) If a lessee makes a payment that exceeds the sum of the scheduled regular rental payment and any permitted additional charges that are due, the lessor may hold the excess funds in a reserve account subject to the following conditions:

   1. (1) The balance of the lessee's reserve account may not exceed the amount of the next scheduled regular rental payment.
   2. (2) If the balance in the lessee's reserve account reaches the limit specified in subdivision (1), the lessor shall apply the funds to the lessee's next scheduled regular rental payment.

3. (c) This section may not be construed to preclude a lessor from accepting and applying:

   1. (1) an initial rental payment; or

   2. (2) multiple regular rental payments;

      before the rental payments' scheduled due dates.

As added by P.L.35-2010, SEC.90. Amended by P.L.69-2018, SEC.38.