An interesting challenge for any attorney is the education of a client with respect to a security deposit. All too often a landlord treats the deposit as his/her money when, in actuality, it remains the property of the tenant. The basic laws governing the security deposit can be found under Massachusetts General Law, Chapter 186 Section 15B, in addition to the Massachusetts Attorney General Regulations, set forth in 940 C.M.R. Section 3.17(4). Violations of the security deposit laws can also result in violation of Massachusetts General Law, Chapter 93A. The legal landscape regarding the handling of a tenant’s security deposit is complicated. Attorneys, especially those unfamiliar with landlord/tenant law, can sympathize with this sentiment. Therefore, it is absolutely essential that attorneys representing either landlords or tenants be intimately familiar with the legal significance of security deposits in Massachusetts.
At the inception of a tenancy, a landlord cannot demand a security deposit amount exceeding the first month’s rent. Upon receiving said deposit, the landlord must give the tenant a receipt stating the amount of the security deposit, the name of the person receiving it, the date on which it was received, and the description of the rented premises. A lesser-known requirement provides that upon receipt of the security deposit or within ten days of commencement of the tenancy, the landlord must provide the tenant with a signed statement of the present condition of the premises. The tenant then has fifteen days from receipt the opportunity to return the statement with additional damages not previously included. In this event, then the landlord, within fifteen days, is obligated to return a signed copy noting an agreement or any disagreement with the additions made by the tenant.
While most landlords understand that the deposit must be held in a bank account, this account must actually be separate, interest-bearing, and be located in Massachusetts. Moreover, within thirty days of possession of the security deposit, the landlord must provide the tenant another receipt indicating the name of the bank, the location of the bank, the account number of the deposit, and finally its total amount.
If the deposit is held for more than one year, the landlord must pay the tenant interest on the deposit at five percent or at the rate paid by the bank if it is less than five percent. If the landlord fails to pay or credit the interest within thirty days of the anniversary of the deposit, the tenant is entitled to deduct the interest payment from the next rent payment.
A key provision that must be noted and understood by advocates for either side, are actions that a landlord must take after a tenant vacates their unit. A landlord must return a tenant’s deposit or balance thereof together with any interest owed within thirty days of the end of the tenancy. Further, a landlord may only deduct actual amounts to reimburse for unpaid rent, unpaid tax increases, or for a reasonable amount necessary to repair any tenant caused damage. In the event the landlord does retain a portion of the deposit, then a statement, signed under the pains and penalties of perjury, must be sent to the tenant. This statement must be complete with an itemized list of deductions accompanied by written documentation of the cost of the repairs.
Any noncompliance with these obligations can result in damages ranging from its immediate return up to a landlord being held liable for three times the amount of the security deposit, plus interest, together with court costs and reasonable attorney’s fees. Because this potential liability often far outweighs the benefit of demanding a security deposit, landlords should rethink requesting it and instead considering the course of action of raising the monthly use and occupancy fees. Nevertheless, both sides need to be proactive in advocating issues relating to the security deposit. A vast understanding of these challenging and complicated requirements is an indispensable skill, ultimately benefiting any attorney representing clients in housing related matters.