Collecting a security deposit is one of the first activities a landlord will do with a new tenant. As in most states, Pennsylvania has statutory language regarding the amount and the collection/return process for the security deposit.
Pennsylvania uses a graduated system for the security deposit amount, with the amount allowed to be collected by the landlord declining with the amount of time the tenant is in the same property. As per 68 P.S § 250.511a, a security deposit in Pennsylvania may not be greater than two months’ rent during the first year of the lease. During the second or subsequent years of the lease, or during any renewal of the original lease, the security deposit may not exceed one month’s rent. Furthermore, any amount that the landlord collected previously that exceeds the one month’s maximum amount must be returned to the tenant. Additional language in the statute explains that if a tenant has had possession for five years or more any increase in rent must not require an increase in the security deposit amount. It’s statutes like this that make it important as a landlord to review your state’s laws before becoming a landlord.
Interest to be provided
For security deposits greater than $100, landlords must place the security deposit in an interest bearing account once the tenant has lived in the premises for two years. The landlord must also inform the tenant of the name and address of the bank where the security deposit is held. The landlord is allowed to receive a 1% annual fee on the security deposit as an administrative expense. Finally, the landlord must pay the interest earned each year to the tenant, on the anniversary date of the start of the lease.
What can the security deposit be used for?
The security deposit is intended to be applied toward any breach of the rental agreement. That would include damage to the premises or the property where the premises is located (e.g. parking areas, other buildings, common areas), as well as furniture, fixtures, appliances, and carpets. The deposit can also be used toward the consequences that may arise from the tenant abandoning the premises, nonpayment of rent, late charges, and attorney’s fees. The deposit cannot be applied toward ordinary wear and tear, nor can it be used for the last month’s rent.
Returning the security deposit
The landlord has 30 days after the rental agreement terminates to return the tenant’s security deposit with an itemized statement that lists any deductions, along with applicable interest. For this reason it’s important to obtain the forwarding address for the tenant. It is the tenant’s responsibility to provide the forwarding address, and if not provided the landlord is relieved from any liability regarding the return of the security deposit.