Seven Things to Know About the Security Deposit Law

I receive a lot of calls from clients with questions about security deposits that their landlord has taken. The security deposit law in Massachusetts is not overly complex, it just requires precision. Here are some things that both landlords and tenants should know about the rules regarding security deposits on residential properties.

1. A landlord may not take more than one month's rent as a security deposit. For example, if the tenant's rent is $1,000 per month, the landlord may not ask the tenant for the $1,000 and then an additional security deposit, for example, the keeping of a pet. If the tenant has a pet and the landlord wants to take extra security because of the pet, then landlord needs to either raise the rent, prohibit pets or take the risk that the $1,000 is enough.
2. When a landlord takes a security deposit, he or she must give the tenant a receipt for the security deposit.
3. The landlord must deposit the security deposit in an account which is beyond the reach of the landlord's creditors within the Commonwealth of Massachusetts. The Landlord must provide the tenant with a receipt showing the bank, the account number, the amount and date of deposit of your funds.
4. If the Landlord does not handle this procedure properly (i.e., the depositing and providing a receipt), the tenant is entitled to its return on demand. The failure to do so will subject the landlord to paying three times the security deposit plus the tenant's reasonable attorneys fees. It does not matter that the landlord did not mishandle the security deposit on purpose.
   
5. The Landlord must also provide the tenant with a Statement of Condition. It is very important that the tenant list all problems with the apartment. If it is not listed, the tenant can be held responsible for that damage at the end of the lease.
   
6. If a tenant stays in the apartment more than 12 months, on the 13th month, the tenant is entitled to receive the interest that the security deposit has earned over the past year. In the alternative, a landlord can instruct the tenant to deduct the interest from the 13th month rent check.
7. The landlord must return the security deposit within 30 days after the end of the tenancy. If the landlord wishes to deduct anything from the security deposit, he or she must provide the tenant with receipts or estimates for the cost of the repair and sign an accounting under the pains and penalties of perjury. The failure to follow this procedure exactly entitles tenants to multiple damages, plus attorneys fees.

The good part for the tenant is that if the landlord does not follow the rules, the tenant can hire a lawyer and recover the attorneys fees.

As for landlords, if the procedure is followed correctly, a security deposit can be a valuable tool to retain funds for a tenant who does not take care of the rental unit. However, if you are a landlord and you have not maintained a security deposit according to the statute, be prepared to return it upon demand. The failure to return the security deposit on demand if it has been mishandled will only result in the payment of three times the security deposit and your tenant's legal fees. Before you take a security deposit, consult the law and/or a lawyer. It is very important that this is done correctly.