Amount and separate account

The legal limit for a security deposit in Maryland is 2x the monthly rent amount. And while it’s a best practice to provide a receipt to the tenant for any payment they make, Maryland requires that the landlord provide a receipt for the security deposit. The landlord is also required to place the security deposit in a separate account within 30 days of receipt from the tenant. The deposit must be placed in a federally insured financial institution in Maryland, per MD Code, Real Property, § 8-203.

Allowable Charges

It’s fairly common knowledge that the landlord can use the security deposit for damage beyond ordinary wear and tear that is attributable to the tenant. The landlord can also apply the security deposit toward any breach of the rental agreement including unpaid rent, or damage due to a breach of the lease. Furthermore, the tenant may not apply the security deposit to the last month’s rent or any other charges. And here’s where keeping accurate records comes in again - the landlord must also itemize all charges and be able to substantiate all charges upon written request by the tenant.

Move-out inspection

At move-out the landlord will perform an inspection of the premises to determine any damage. Per MD Code, Real Property, § 8-203(f), the tenant has the right to be present for this inspection if the tenant provides written notice to the landlord, which must include a statement of the tenant’s intention to move, date of moving, and a forwarding address. This written notice by tenant must be sent by certified mail at least 15 days prior to moving. After receiving the notice the landlord must notify tenant by certified mail of the time and date when the premises will be inspected. The date of inspection must occur within five days before or five days after the date of moving, as designated in the tenant’s written notice.

Return Of Security Deposit And Interest

The landlord must return the security deposit to the tenant within 45 days after the termination of the rental agreement or surrender of the premises, whichever occurs last. The landlord must return the security deposit, along with any applicable interest, by first-class mail directed to the last known address of the tenant, and must include a written list of damages with the costs actually incurred. Maryland law dictates that the interest on the security deposit shall accrue in the amount of 3% per annum, and shall accrue at six month intervals from the day the tenant provides the security deposit to the landlord. Interest is not compounded, and shall be payable only on security deposits of $50 or more. It is important to note that the landlord is not required to comply with the procedure outlined above for returning the security deposit if the tenant has abandoned the premises prior to the termination of the agreement term. But bear in mind, if a landlord fails to properly comply with the return of the deposit in all other cases they may be liable to tenant for damages up to 3x the security deposit withheld.