Collecting an adequate security deposit is one of the smartest things you can do as a landlord. The security deposit is intended to cover damages beyond normal wear and tear, but the landlord can also use the deposit for unpaid rent, late charges, and other unpaid fees. What you need to do after collecting the security deposit is equally important, and the laws in Connecticut dictate some of the steps you will need to take with the security deposit.
Amount and escrow account
The amount of the security deposit will depend on the age of the tenant, because in Connecticut there is a provision in the security deposit statute limiting the amount of the deposit for tenants over the age of 62. If the tenant is under sixty two years of age the security deposit can be no more than two months’ rent. If the tenant is over sixty years of age the security deposit maximum is one month’s rent. In either case, it’s good practice to provide a receipt for the amount of the deposit.
Connecticut is one of those states where the security deposit must be held in an escrow account. Conn. Gen. Stat. § 47a-21(h) does not go so far as to require disclosure of the name or the address of the financial institution, but interest must be paid on the anniversary date of a tenancy, either as a direct payment to tenant or as a credit against the next month’s rent. Interest on the security deposit is not due to a tenant for any months when they are more than ten days late paying their rent. The exception to this is when a tenant's rental agreement already contains a late charge for overdue rental payments. The interest rate for security deposits and the calculation of interest can be found at the Connecticut Department of Banking.
Returning the deposit
It’s important that the tenant provide a forwarding address prior to moving out. The landlord is required to return the security deposit within 30 days after termination of the rental agreement or surrender of the premises, whichever occurs last. What the landlord sends to the tenant depends on whether all or a portion of the security deposit is being retained to pay for damages. The landlord will do one of the following:
- Return the entire security deposit plus accrued interest.
- Return the balance of the security deposit, plus accrued interest, after deduction for any damages suffered by the landlord, together with an itemized written statement of damages.
Failure to comply with the correct procedure for returning the security deposit can cost the landlord. Failure to return the deposit, whatever the amount, along with an itemized receipt of charges within the time period specified could make the landlord liable for twice the amount of any security deposit paid by the tenant. The one exception is if the violation is the failure to deliver the accrued interest, in which case the landlord is only liable for twice the amount of the accrued interest.