Taking a security deposit is a necessary part of beginning a lease agreement between tenant and landlord. To protect yourself as a landlord, make sure you have a signed lease agreement and have received all upfront rent and the security deposit before handing over the keys to the rental unit. This means waiting for any checks to clear.

Amount and escrow account required

In the District of Columbia a security deposit cannot exceed one month’s rent, and it must be deposited in an interest bearing escrow account in a financial institution in the District of Columbia that is insured by a federal or state agency. The landlord must disclose the name and address of the financial institution, and must inform the tenant of the prevailing interest rate for each six-month period over the past year.

Charges and inspection

When it comes time to return the security deposit the landlord is allowed to charge for breaches of the agreement, which could include physical damages such as damage to the Premises, any of the buildings, common areas, parking areas, furniture, fixtures, carpet, or appliances. A landlord can also charge for monetary damages incurred due to abandonment of the premises, nonpayment of rent, and late charges. The tenant can not apply the security deposit to the last month’s rent or any other charges.

When it comes time for the tenant to vacate, D.C. Mun. Regs. Tit. 14, § 310 states that in order to determine the amount of the security deposit or other payment to be returned the landlord must first inspect the premises within three days, excluding Saturdays, Sundays, and holidays, before or after the termination of the tenancy. The landlord must schedule the inspection at a time and date that is communicated to tenant in a notice of inspection. The notice of inspection must be delivered to the tenant, or at the premises, at least ten days before the date of the intended inspection.

Return of the deposit and interest due

District of Columbia landlord tenant law requires the landlord to return the security deposit, minus any charges, within 45 days after the rental agreement terminates. The landlord has two options:

  1. Return the security deposit including any interest.
  2. Notify tenant in writing of the intention to withhold the security deposit to cover damages or other charges. If there are damages or other charges, the landlord has another 30 days to return the balance of the security deposit, any applicable interest, and an itemized statement of repairs or other charges that were deducted from the security deposit.

A landlord must pay interest interest on a security deposit in an escrow account for tenancies of 12 months or greater. Interest is paid at termination of the tenancy. The accrual of interest begins on the date the security deposit is paid by tenant and accrues at the statement savings rate. At the end of a tenancy, the landlord must list for tenant the interest rate for each six-month period during the tenancy. So, it’s important to stay organized when it comes to security deposits, keep accurate records, and document everything.