Thursday, April 28, 2016

Security Deposits and Eviction

Yesterday, the Supreme Judicial Court handed down a ruling in the landlord tenant realm that every landlord and tenant needs to understand.  It ruled that a violation of the security deposit law not only can be a basis for counterclaim as to damages, but is a defense to a landlord's claim for possession.

What does this mean?  It means that if a landlord is attempting to evict a tenant and the tenant claims that the landlord failed to properly handle the security deposit, if the tenant wins on that claim, the tenant can defeat the landlord's claim to evict the tenant and the tenant gets to stay in the unit.

How will this play out in an eviction case?  Let's say the Landlord brings a summary process action to evict the tenant for non-payment of rent.  The tenant counterclaims on a number of claims, including that the landlord did not handle the security deposit properly.  Trial is held and the tenant succeeds in his claim that the security deposit was mishandled and is awarded damages.  The amount awarded for the mishandled security deposit is offset against the outstanding rent.  IF the tenant's damages exceed the landlord's damages, then the tenant keeps possession.  IF the landlord's damages exceed the tenant's damages, the tenant must be given seven days to pay the amount owed to the landlord and if the tenant pays, then the tenant keeps possession.  The same rules apply for a no fault eviction.

Before starting a summary process action, we always ask our landlord clients whether a security deposit was taken and if so, how it was handled.  Landlords must be vigilant in documenting, maintaining and handling security deposits and be prepared to return the deposit in the event that it was not handled properly to avoid tenants succeeding on these types of claims.

Tenants must keep track of the paperwork that they were provided upon move in, and should keep a copy of the check they wrote for the security deposit. If there is any question as to how the security deposit was handled, a security deposit counterclaim should be raised.  If a tenant is withholding rent due to conditions, it is more important than ever to escrow those funds, even though that is not required by law.  A tenant only has 7 days to pay the money into court, including weekends and holidays.  This time frame, ultimately, might be fairly short and the tenant should not have to scramble for the funds.