Many first time landlords are unsure of how much they should charge for a security deposit. Landlords need to first check with their state’s laws to see if there is a maximum amount for the security deposit, and while checking for that piece of information, also review the procedure for the collection and return of the deposit. Some states, like Massachusetts, have statutes regarding the security deposit that if not followed can create a headache for a landlord.
Amount of deposit
The maximum amount of security deposit that a landlord can request is one month’s rent.
Separate account for deposit and interest
In Massachusetts the landlord must put the security deposit in a separate, interest-bearing bank account located in Massachusetts. The statute states that the security deposit will accrue interest at the rate of 5% per year or a lesser amount of interest that has been received from the bank where the deposit is held. The landlord is obligated to pay the interest accrued to tenant each year. If the tenancy is terminated prior to the end of the stated agreement term the landlord must pay the tenant any accrued interest within 30 days of the termination.
The landlord has some additional paperwork concerning the security deposit. At the end of each year of a tenancy the landlord must provide the tenant with a statement which indicates the name and address of the bank where the security deposit has been placed, the amount of the deposit, the account number, and the amount of interest payable by landlord to tenant. It is along with this receipt that the landlord provides the tenant with the interest due for that year. The tenant can opt to not receive the interest but instead deduct it from the next rent payment.
When the landlord first collects the security deposit a receipt must be provided to the tenant within 30 days. The receipt must include the name and location of the bank in which the security deposit has been deposited, the amount, and the account number where the deposit is held. Putting the deposit in a separate account and providing the receipt is important because failure to do both entitles the tenant to the return of the security deposit.
Written Statement Of Present Condition
In Massachusetts a landlord must also provide a Statement of Present Condition to the tenant after receiving the security deposit. The written statement must contain a comprehensive listing of any existing damage to the premises. The statement must be signed by the landlord and must contain the following notice in twelve-point bold-face type at the top off the first page:
This is a statement of the condition of the premises you have leased or rented. You should read it carefully in order to see if it is correct. If it is correct you must sign it. This will show that you agree that the list is correct and complete. If it is not correct, you must attach a separate signed list of any damage which you believe exists in the premises. This statement must be returned to the lessor or his agent within fifteen days after you receive this list or within fifteen days after you move in, whichever is later. If you do not return this list, within the specified time period, a court may later view your failure to return the list as your agreement that the list is complete and correct in any suit which you may bring to recover the security deposit.
The tenant should review the statement and submit, if necessary, a separate list of damages. The landlord has 15 days after receiving such a list to revise the Statement of Present Condition or issue a clear written statement of disagreement.
Returning the security deposit
The final point of compliance for the Massachusetts landlord regarding security deposits is with the return of the deposit. A landlord is required to return the security deposit or any balance of the deposit within 30 days after the tenancy terminates. The landlord is allowed to deduct from the deposit certain charges as follows:
- Any unpaid rent or water charges which have not been validly withheld or deducted by the tenant.
- Any unpaid increase in real estate taxes which tenant is obligated to pay.
- An amount for repairing any damage caused by tenant or any person under tenant’s control or on the premises with tenant’s consent, reasonable wear and tear excluded. If there is damage beyond normal wear and tear the landlord must provide the tenant within 30 days with an itemized list of the damages, including detail about the repairs that are necessary and written evidence of the cost to repair the damage (bills, estimates, invoices, receipts).